    Very Light Jets: Several Factors Could Influence Their Effect on
    the National Airspace System (24-AUG-07, GAO-07-1001).

    For several years, a number of aviation manufacturers have been
    designing and testing very light jets, a type of small jet
    aircraft equipped with advanced technologies and priced below
    other business jets. Aviation forecasters predict that thousands
    of very light jets will enter the National Airspace System (NAS)
    over the next two decades, contributing to the overall growth of
    the general aviation fleet. While some experts predict that very
    light jets will be used in ways that are similar to current
    general aviation aircraft, others predict that they will be used
    to expand the air taxi market to provide on-demand,
    point-to-point air transportation. In 2006, the Federal Aviation
    Administration (FAA) certified the first very light jets for
    flight. This report identifies (1) current very light jet
    forecasts and what factors could affect very light jet
    deliveries, (2) how increasing numbers of very light jets might
    affect the capacity and safety of the NAS, (3) how FAA is
    planning to accommodate the entry of very light jets into the
    NAS, and (4) how very light jets might affect FAA's costs and
    Airport and Airway Trust Fund revenues. To address these issues,
    GAO reviewed relevant documents and interviewed agency officials
    and aviation experts. GAO is not making recommendations in this
    report. The Department of Transportation provided technical
    clarifications, which were incorporated as appropriate.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-1001
        ACCNO:   A75069
      TITLE:     Very Light Jets: Several Factors Could Influence Their
    Effect on the National Airspace System
         DATE:   08/24/2007
      SUBJECT:   Air transportation
    	     Aircraft
    	     Aircraft industry
    	     Airline regulation
    	     Commercial aviation
    	     Standards
    	     Transportation safety
    	     Trust funds
    	     Policies and procedures
    	     Airport and Airway Trust Fund

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    GAO-07-1001

         * [1]Results in Brief
         * [2]Background
         * [3]Current Market Forecasts for Very Light Jets Vary Widely, Re

              * [4]Very Light Jet Forecasts Estimated a Range of Very Light Jet
              * [5]Very Light Jet Forecasts' Assumptions Vary, Especially Regar
              * [6]Limited Information Is Available for Forecasting Very Light

         * [7]Studies and Expert Opinions Varied on How Very Light Jets Wi

              * [8]Studies and Experts Identified Factors That Would Influence
              * [9]Very Light Jets Will Likely Have Little Effect on Safety, Ac

         * [10]FAA Officials Believe Procedures and Policies Are in Place t

              * [11]FAA Officials Stated They Have Procedures and Policies in Pl
              * [12]FAA Is Taking Steps to Prepare for the Introduction of Very
              * [13]FAA Officials Believe That NAS Modernization Will Accommodat

         * [14]Several Factors Will Influence the Effect of Very Light Jets

              * [15]Several Factors Will Influence the Effect of Very Light Jets
              * [16]Several Factors Will Influence the Effect of Very Light Jets
              * [17]Reauthorization Proposals Call for Changes to Funding Struct

         * [18]Agency Comments
         * [19]Appendix I: Objectives, Scope, and Methodology
         * [20]Appendix II: GAO Contact and Staff Acknowledgments

              * [21]GAO Contact
              * [22]Staff Acknowledgments

                   * [23]Order by Mail or Phone

    Report to Congressional Requesters

    United States Government Accountability Office

    GAO

    August 2007

    VERY LIGHT JETS

    Several Factors Could Influence Their Effect on the National Airspace
    System

    GAO-07-1001

    Contents

    Letter 1

    Results in Brief 3
    Background 5
    Current Market Forecasts for Very Light Jets Vary Widely, Reflecting
    Differences in Assumptions and Limited Available Information 11
    Studies and Expert Opinions Varied on How Very Light Jets Will Affect
    Capacity, but Most Experts Believe Very Light Jets Will Have Little Effect
    on Safety 20
    FAA Officials Believe Procedures and Policies Are in Place to Accommodate
    Very Light Jets, but FAA Is Taking Steps to Prepare for Their Introduction
    23
    Several Factors Will Influence the Effect of Very Light Jets on FAA's
    Costs and Trust Fund Revenues 27
    Agency Comments 32
    Appendix I Objectives, Scope, and Methodology 34
    Appendix II GAO Contact and Staff Acknowledgments 38

    Tables

    Table 1: Use Categories of General Aviation 10
    Table 2: Summary of Assumptions Influencing Very Light Jet Forecasts 15
    Table 3: Estimated Excise Tax Contribution for a Very Light Jet by Type of
    Flight 30

    Figures

    Figure 1: FAA Activities and Services 6
    Figure 2: Proposed Very Light Jet Models as of July 2, 2007 8
    Figure 3: Total Forecasted Number of Very Light Jets 13

    This is a work of the U.S. government and is not subject to copyright
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    Abbreviations

    ADS-B Automatic Dependent Surveillance-Broadcast
    FAA Federal Aviation Administration
    MIT Massachusetts Institute of Technology
    NAS National Airspace System
    NASA National Aeronautics and Space Administration

    United States Government Accountability Office
    Washington, DC 20548

    August 24, 2007

    The Honorable John Mica
    Ranking Republican Member
    Committee on Transportation and Infrastructure
    House of Representatives

    The Honorable Jerry Costello
    Chairman
    The Honorable Thomas Petri
    Ranking Republican Member
    Subcommittee on Aviation
    Committee on Transportation and Infrastructure
    House of Representatives

    For several years, a number of aviation manufacturers have been designing
    and testing very light jets, a new type of small jet aircraft that are
    priced below other business jets and which will come equipped with
    advanced avionics and can be certified for single-pilot operation. In
    2006, the Federal Aviation Administration (FAA) certified the first very
    light jets to fly in the National Airspace System (NAS). According to very
    light jet manufacturers, six very light jets had been delivered as of
    March 31, 2007. Business aviation forecasters predict that thousands of
    very light jets will enter the airspace over the next couple of decades,
    some of which may be used for air taxi operations (i.e., on-demand
    point-to-point air transportation service), contributing to the overall
    growth of the general aviation fleet. Some industry experts have raised
    concerns about increased congestion resulting from very light jets' entry
    into the NAS given projected growth in commercial air travel, which FAA
    predicts will increase from 740 million passengers flying in fiscal year
    2006 to 1 billion passengers in 2015. For several years, a number of
    aviation manufacturers have been designing and testing very light jets, a
    new type of small jet aircraft that are priced below other business jets
    and which will come equipped with advanced avionics and can be certified
    for single-pilot operation. In 2006, the Federal Aviation Administration
    (FAA) certified the first very light jets to fly in the National Airspace
    System (NAS). According to very light jet manufacturers, six very light
    jets had been delivered as of March 31, 2007. Business aviation
    forecasters predict that thousands of very light jets will enter the
    airspace over the next couple of decades, some of which may be used for
    air taxi operations (i.e., on-demand point-to-point air transportation
    service), contributing to the overall growth of the general aviation
    fleet. Some industry experts have raised concerns about increased
    congestion resulting from very light jets' entry into the NAS given
    projected growth in commercial air travel, which FAA predicts will
    increase from 740 million passengers flying in fiscal year 2006 to 1
    billion passengers in 2015.

    Recognizing that the current aviation system cannot expand to meet this
    projected growth in demand for air travel, FAA currently is involved in a
    multiagency planning effort to transform the nation's current air traffic
    control system to a more modern system that is intended to safely
    accommodate a possible tripling of air traffic by 2025. As FAA works to
    begin implementing improvements to the air traffic system, the question of
    how to fund this modernization effort has come under review, especially
    since most of the excise taxes that go into the Airport and Airway Trust
    Fund (Trust Fund)--which funds most of FAA's budget--are scheduled
    Recognizing that the current aviation system cannot expand to meet this
    projected growth in demand for air travel, FAA currently is involved in a
    multiagency planning effort to transform the nation's current air traffic
    control system to a more modern system that is intended to safely
    accommodate a possible tripling of air traffic by 2025. As FAA works to
    begin implementing improvements to the air traffic system, the question of
    how to fund this modernization effort has come under review, especially
    since most of the excise taxes that go into the Airport and Airway Trust
    Fund (Trust Fund)--which funds most of FAA's budget--are scheduled for
    reauthorization at the end of fiscal year 2007. Because of the importance
    of meeting the nation's air transportation demands, you asked us to study
    the possible effects of the introduction of very light jets on the NAS and
    on FAA. Accordingly, we addressed the following questions: (1) What are
    the current forecasts for very light jet deliveries and what factors could
    affect very light jet deliveries? (2) How might increasing numbers of very
    light jets affect the capacity and safety of the NAS? (3) How is FAA
    planning to accommodate the entry of very light jets into the NAS? (4)
    What factors will influence very light jets' effect on FAA's costs and
    Trust Fund revenues?

    To identify current forecasts for very light jets, we reviewed government,
    academic, and aviation industry studies and interviewed aviation experts
    to compile a list of publicly and commercially available forecasts. We
    selected eight forecasts to review on the basis of criteria that we
    established (e.g., being published within the past 12 months and providing
    a specific number of aircraft within a timeframe). We reviewed the
    forecasts and determined that they were sufficiently reliable for our
    purposes. To identify factors that could affect the number of very light
    jets delivered, we obtained information from organizations and individuals
    with expertise in general and business aviation. To determine how
    increasing numbers of very light jets could affect the capacity and safety
    of the NAS, we reviewed industry studies and interviewed government
    officials and aviation experts. To understand how FAA plans to accommodate
    potential very light jet demand, we met with FAA officials to discuss how
    FAA handles new aircraft and its plans for modernizing the air traffic
    control system. We also asked selected government and industry
    organizations to identify what actions FAA should be taking to prepare for
    very light jets. To determine the effect of very light jets on FAA's costs
    and Trust Fund revenues, we met with FAA officials to discuss the way they
    allocate costs to aviation users, including very light jet operators, and
    the taxes that are typically paid by general and business aviation users.
    We discussed how the administration's reauthorization proposal would treat
    general and business aviation users, including very light jet operators.
    We reviewed congressional alternatives to the administration's proposal.
    We also discussed aviation taxes with excise tax experts from the Internal
    Revenue Service's Office of Chief Counsel. We conducted our work from
    September 2006 through July 2007 in accordance with generally accepted
    government auditing standards. See appendix I for a more detailed
    explanation of our scope and methodology.

    Results in Brief

    The eight forecasts we examined provided a range of both the number of
    very light jets projected to be delivered (roughly 3,000 to 7,600) and the
    dates by which those numbers would be reached (from 2016 to 2025). The
    factors used to estimate the number of very light jets and the assumptions
    about them varied. Factors that might affect the number of very light jet
    deliveries, according to the forecasts, included the development of the
    air taxi market, economic growth, production constraints, insurance and
    training requirements, and expected aircraft retirements, among others. In
    addition to examining very light jet forecasts, we spoke with aviation
    experts about the factors that they thought would most affect the number
    of very light jet deliveries over the next 10 to 20 years. The factor they
    mentioned most often was the growth of the air taxi market, although some
    believed the air taxi market could significantly increase the demand for
    very light jets while others believed that air taxi operations would not
    succeed on a large scale. We found that the eight forecasts we examined
    were based on limited information. For example, since very light jet
    manufacturers have just begun to produce new aircraft, there is little
    information on delivery trends for these aircraft. In addition, there was
    less consensus across the very light jet forecasts compared to other
    business jet forecasts, and past very light jet forecasts have failed to
    accurately predict when these aircraft would enter the NAS.

    According to studies we reviewed and aviation experts we contacted, we
    found that there were various opinions about how increasing numbers of
    very light jets would affect capacity in the NAS, although most experts
    believed that very light jets would have little effect on safety. We
    examined two studies that found that the type and location of airports
    used by very light jet operators will influence the effect of these
    aircraft on NAS capacity. Experts we spoke with also indicated that the
    type of airports used by very light jet operators was important. For
    example, many experts believed that very light jets will travel to small
    airports that have excess runway capacity. However, a few experts believed
    that very light jets will travel to large airports and thus could affect
    NAS capacity by contributing to airline delays. In addition to airport
    type, experts indicated that the effect of very light jets on NAS capacity
    depends on other factors including the various uses of very light jets in
    the airspace, the trip length and altitude of very light jet flights, the
    implementation of new air traffic control technologies and equipment, the
    performance capabilities of very light jets, and the rate of integration
    of very light jets. Most experts we contacted believed that very light
    jets will likely have little overall effect on safety due to FAA's
    certification processes and procedures for aircraft, pilots, and
    maintenance, all of which apply to very light jets.

    According to FAA, the agency currently has the policies and procedures in
    place to accommodate the entry of very light jets--which it believes will
    occur incrementally--into the NAS. These officials, and several other
    experts with whom we spoke, agreed that very light jets are similar to
    other aircraft currently in operation and do not require substantial
    changes to existing policies and procedures. However, FAA is taking
    additional steps to specifically address any unique issues surrounding the
    integration of very light jets as a precautionary measure to ensure that
    these aircraft are integrated smoothly. For example, FAA established a
    cross-organizational group to facilitate communication about very light
    jets across FAA departments. FAA officials stated that large numbers of
    very light jets may pose resource challenges, but the agency has plans in
    place to address this issue as needed. For example, according to
    officials, FAA is planning on redeploying resources and is having
    discussions with local FAA offices that are expecting to see increased
    demand for inspectors. In the long term, FAA expects that the deployment
    of new technologies, such as communications equipment that will enable
    pilots and controllers to have a common picture of airspace and traffic,
    will help integrate very light jets into the NAS. Because the aircraft
    will have advanced avionics, they will be able to take full advantage of
    new air traffic control technologies. Most experts we contacted expressed
    support for FAA's modernization activities as a way to maintain system
    capacity and safety for all aircraft, including very light jets, but
    encouraged FAA to work to rapidly deploy such technologies.

    The effect of increasing numbers of very light jets on FAA's costs and
    Trust Fund revenues will depend on several factors in addition to the
    number of very light jets deployed, such as the extent to which they
    replace existing aircraft and whether they are operated for commercial or
    noncommercial purposes. There is uncertainty, however, about these factors
    that leads to uncertainty about the effect on costs and revenues. For
    example, one critical but largely speculative factor is the extent to
    which a market for air taxi services using very light jets will develop.
    If very light jets are used in air taxi operations it would add to FAA's
    costs, but also increase revenues, because the planes would have a higher
    rate of use than very light jets used in noncommercial operations. The
    administration has submitted a proposal for reauthorizing FAA that calls
    for a change in the current excise tax structure, and Congress is
    considering funding alternatives as well. However, due to the amount of
    uncertainty regarding the number and use of very light jets, there is too
    little information to accurately assess the revenue impacts under the
    various proposals.

    We provided a draft of this report to the Department of Transportation for
    review and comment. The Department of Transportation provided technical
    clarifications, which we incorporated in the report as appropriate.

    Background

    FAA is responsible for regulating and promoting the safety of general
    aviation, including very light jets, by overseeing manufacturers and
    operators to require full compliance with safety regulations. General
    aviation includes all civil aircraft not flown by commercial carriers or
    the military.1 To this end, FAA must certify any new aircraft design
    before that aircraft can be registered in the United States for private or
    commercial operations. When aircraft manufacturers request approval of a
    new aircraft type design, FAA uses the type certification process to
    ensure that the design complies with applicable requirements and
    airworthiness standards. FAA issues production certificates, which allow
    manufacturers to obtain an airworthiness certificate for duplicate
    aircraft produced under an FAA-approved type design. FAA also is
    responsible for establishing and enforcing standards for the certification
    of pilots and instructors as well as maintenance technicians and repair
    stations. FAA expects that most owner operators of very light jets will
    already have a pilot certification and the associated flight experience.

    Another of FAA's primary functions is managing air traffic, which includes
    a variety of complex activities that guide and control the flow of
    aircraft through the NAS. Generally, commercial aircraft fly under
    instrument flight rules that require air traffic services, which are
    provided by FAA. Control towers guide these flights in the terminal and
    runway areas and through takeoffs and landings. Once in the air and beyond
    the immediate vicinity of the airport, aircraft rely on the terminal radar
    approach control centers to guide them out of the airspace surrounding the
    airport.2 Then, the flight is passed to air route traffic control centers
    to provide en route control until they near their destinations. (See fig.
    1.) Nearly all business jets and roughly half of general aviation piston
    engine flights fly under instrument flight rules and file flight plans
    that are used by air traffic control to reserve time and location in the
    NAS.3 However, many general aviation flights operate entirely under visual
    flight rules and may not use air traffic control services at all if they
    fly from and to airports that do not have towers. Other general aviation
    flights operating under visual flight rules may require ground control and
    traffic advisories, which are provided by air traffic control towers, and
    other air traffic centers.

    1According to FAA, there is no standard definition for the term general
    aviation; its definition changes depending on, among other things, whether
    one is referring to safety statistics or user categories. In addition, for
    purposes of its recent cost allocation study, FAA included air taxis,
    which are sometimes considered general aviation aircraft, as commercial
    aircraft based on the taxes that are assessed to air taxi operators.

    2Depending on the airport's location, the approach control facilities may
    be located within the airport's control tower or at separate facilities.

    Figure 1: FAA Activities and Services

    Very light jets are a new entrant into the U.S. airspace. Very light jet
    is a marketing term with no single definition, although most aviation
    experts describe these aircraft using a combination of the following
    elements: weight and price. Generally speaking, very light jets are jet
    aircraft with a maximum take-off weight of 10,000 pounds, certificated for
    single pilot operations, equipped with advanced avionic systems, and
    priced below other business jets.4 By this definition, we identified nine
    proposed very light jet models as of July 2, 2007 (see figure 2). Two of
    these models--the Cessna Citation Mustang and Eclipse 500--have received
    FAA type and production certification and begun delivering aircraft.

    3Business jets are turbojet aircraft weighing less than 100,000 pounds
    maximum gross takeoff weight, with wingspans less than 100 feet that are
    used by companies to conduct their business.

    4In 2006, the average price for a business jet aircraft was $18.71
    million.

    Figure 2: Proposed Very Light Jet Models as of July 2, 2007

    Note: We did not include a number of developmental very light jet aircraft
    in figure 2, such as the Cirrus Jet, the Excel-Jet Sport-Jet, and the
    Spectrum 33 jet because of the lack of sufficient performance and price
    information.

    The aviation industry considers very light jets to be general aviation
    aircraft because of the way they will operate in the NAS. FAA divides
    general aviation activities into use categories, including: air taxi,
    business, corporate, instructional, personal, and other uses (see table
    1). In addition, general aviation aircraft can be used in a fractional
    ownership arrangement, which is when a person or company buys or leases a
    fractional interest in one aircraft. Over the course of the lease, they
    can use that aircraft for a certain number of hours or days per year, as
    do the aircraft's other fractional owners. In 2005, the U.S. general
    aviation fleet consisted of 224,352 active general aviation aircraft that
    flew about 27 million hours. Turbojets--a category of aircraft that will
    include very light jets--made up 4.3 percent or 9,823 of the total active
    general aviation fleet. The rest of the active aircraft included, among
    others, piston engine aircraft, turboprops, and rotorcraft.

    Table 1: Use Categories of General Aviation

                         Percentage of total
                     general aviation flight
    Use                     hours in 2005  Description
    Air taxi                         10.6  On-demand passengers and all cargo
                                              operations
    Business                         12.0  Use of aircraft in connection with
                                              pilot's occupation or private
                                              business
    Corporate                        11.4  Use of aircraft owned or leased by
                                              a corporation or business and flown
                                              by a professional pilot
    Instructional                    13.5  Flying under the supervision of a
                                              flight instructor
    Personal                         34.3  Use of aircraft for pleasure or
                                              personal transportation and not for
                                              business purposes
    Other uses                       17.9  Examples include: Federal, state,
                                              or local government owned or leased
                                              aircraft used for a government
                                              function
    Totala                            100

    Source: FAA.

    aThe total was rounded to 100 percent.

    It is expected that very light jets will be used in ways that are similar
    to other types of general aviation aircraft, such as in corporate fleets
    and as business or personal aircraft.5 However, some companies also are
    planning to use very light jets as air taxis and air charters--operations
    providing on-demand, point-to-point flights. For example, an air taxi
    operator called DayJet is planning to use very light jets to offer
    per-seat on-demand flights on planes servicing selected airports in the
    southeastern United States. This is a departure from the traditional
    charter business model, which requires clients to charter the entire
    airplane for their flight, and sometimes pay for associated repositioning
    costs. In addition, at least one current air taxi company plans to sell
    individual seats on scheduled flights.6

    Current Market Forecasts for Very Light Jets Vary Widely, Reflecting Differences
    in Assumptions and Limited Available Information

    The eight very light jet forecasts we examined predicted a range of 3,016
    to 7,649 in the number of very light jet deliveries as well as a range in
    the dates by which those numbers would be reached, from 2016 to 2025.7
    These forecasts were based on assumptions related to a number of factors
    that could affect the number of very light jet deliveries, especially
    regarding the success or failure of air taxi operations. Aviation experts
    also identified several factors that could affect overall deliveries, such
    as growth of the air taxi market, dissatisfaction with other forms of
    transportation, low purchase price and operating costs, access to
    airports, training and insurance requirements, and production constraints.
    Forecasts were primarily based on expert opinion and used the limited
    information available on the business markets for very light jets.

    5In a previous report, GAO contacted the Department of Transportation and
    industry officials regarding the use of very light jets for serving small
    communities, especially in the near term. These officials noted that
    current very light jet business models indicate operators will provide
    premium point-to-point service between cities that are larger than the
    communities that participate in the Essential Air Service program. The
    Essential Air Service program was established by Congress as part of the
    Airline Deregulation Act of 1978 to help areas that face limited air
    service. See, GAO, Commercial Aviation: Programs and Options for Providing
    Air Service to Small Communities, [24]GAO-07-793T (Washington, D.C.: Apr.
    25, 2007).

    6According to FAA, although current regulations do not allow very light
    jets to operate in scheduled service, FAA is in the process of proposing
    new rules to allow for the operation of these aircraft in scheduled
    service.

    7Deliveries refers to the number of aircraft shipped and received, not the
    total number of aircraft in the NAS.

    Very Light Jet Forecasts Estimated a Range of Very Light Jet Deliveries

    The eight very light jet forecasts we examined predicted different numbers
    of very light jet deliveries--from 3,016 to 7,649--and different dates by
    which those numbers of aircraft would be reached, from 2016 to 2025 (see
    fig. 3).8 Of the forecasts we examined, all except FAA and Velocity Group
    (an aviation consulting firm) forecasts included international deliveries
    of very light jets. Several forecasts predicted that most very light jet
    deliveries would go to customers in North America; one analyst noted that
    sales in the United States could represent around 70 percent of total
    deliveries. The definition of a very light jet differed somewhat across
    the forecasts. For example, some of the forecasts included predictions for
    single-engine very light jets, such as the proposed Diamond D-Jet, while
    other forecasts did not include single-engine aircraft. However, most of
    the forecasts included five new aircraft models that manufacturers have
    scheduled to enter service over the next several years: Adam A700, Cessna
    Citation Mustang, Eclipse 500, Embraer Phenom 100, and HondaJet.

    8See appendix II for our selection criteria for the forecasts we examined.

    Figure 3: Total Forecasted Number of Very Light Jets

    Almost all of the very light jet forecasts we examined were based on
    expert opinion regarding business markets for very light jets and analyses
    of proposed aircraft models. For example, one of the main sources of
    information for developing the FAA forecast was an October 2006 aviation
    expert workshop jointly hosted by the Transportation Research Board and
    FAA. Forecasters also relied heavily on projected economic trends and
    variables, such as expected growth in the gross domestic product and
    corporate profits.9 One of the very light jet forecasts surveyed corporate
    flight departments and general aviation operators about their purchase
    expectations.

    Very Light Jet Forecasts' Assumptions Vary, Especially Regarding the Air Taxi
    Market

    The forecasts we examined considered a number of factors that might affect
    the number of very light jet deliveries, including the development of the
    air taxi market, economic growth, production constraints, insurance and
    training requirements, and expected aircraft retirements, to name a few.
    The forecasts made several assumptions regarding these factors as shown in
    table 2.

    9According to the Commerce Department's Bureau of Economic Analysis, gross
    domestic product is the market value of goods and services produced by
    labor and property in a country, regardless of nationality.

    Table 2: Summary of Assumptions Influencing Very Light Jet Forecasts

                              Assumptions on which very light jet forecasts are
    Forecast organization  based
    Embraer                   o Increasing corporate profits, S&P growth
                                 rates, world gross national product, and U.S.
                                 interest rates
                                 o No serious/major/significant terrorist
                                 incidents or worldwide pandemics
                                 o Successful development of air taxi operations
                                 o New aircraft models
                                 o Aging business jet fleet
                                 o Growth in fractional ownership
    Forecast International    o Continuing economic growth and rising
                                 corporate profits
                                 o No new user fees
                                 o Long term success of air taxi operations
                                 dependent on surpassing regulatory obstacles and
                                 airport access issues
                                 o New aircraft models lead to increased
                                 purchases
                                 o Increased demand for new aircraft because of
                                 low number of used business jets available
                                 o The reputations of established manufacturers
                                 potentially providing an advantage over startup
                                 companies
                                 o Insurance and training considerations
    Honeywell                 o Purchase expectations of corporate flight
                                 departments and general aviation owner/operators
                                 o No unforeseen events, such as war, major
                                 economic shock, fuel crisis, or new regulatory
                                 restrictions
                                 o Moderate economic growth with modest cyclical
                                 perturbations
                                 o New aircraft models lead to increased
                                 purchases
                                 o Demand from emerging air taxi operations is
                                 not factored into the estimates and would be
                                 considered additive to overall demand should the
                                 air taxi business model prove widely viable
    PMI Media Limited         o Moderate economic growth with a slowdown in
                                 2010-2012, followed by a recovery
                                 o Air traffic congestion fears are unfounded
                                 o Air taxi operators will consolidate and
                                 eventually evolve into fractional ownership
                                 operations
                                 o Advantage of manufacturers familiar with the
                                 certification process with other aircraft
                                 o Time to develop high volume production as the
                                 supply chain ramps up
    The Teal Group            o High corporate profits, high commodity prices,
    Corporation               and growth in emerging markets
                                 o Organic growth in the number of corporate
                                 flight departments
                                 o A large number of aircraft retirements are
                                 expected
                                 o Established manufacturers having an edge over
                                 newcomers
                                 o The air taxi market will not succeed, except
                                 on a small scale
                                 o Very light jets serving as replacement
                                 aircraft for high-end turboprops
                                 o Extensive training, insurance, and financing
                                 as barriers to entry
    Velocity Group            o Air taxi operations capturing a percentage of
                                 high yield customers (i.e., domestic airline
                                 travel at full fare coach, business class or
                                 first class)
                                 o Higher demand for air taxi service in
                                 communities with poor commercial service
                                 o The timing of demand growth, the expected
                                 utilization of aircraft, and passenger load
                                 forecasts
                                 o Very light jets capturing twenty percent of
                                 the total turbine market sold in the $0.5 to $4
                                 million price category for use in private,
                                 charter, and fractional operations
    Federal Aviation          o Moderate economic growth
    Administration            o No major geopolitical events
                                 o Sufficient infrastructure to handle projected
                                 levels of activity and keep pace with demand
                                 o Sufficient growth in the on-demand air taxi
                                 market to absorb a majority of projected very
                                 light jet deliveries
                                 o Production on pace with predicted demand
                                 o The aircraft perform as advertised
    Rolls-Royce               o Infrastructure on pace with growth
                                 o Strong future macro economic growth with
                                 rising corporate and personal wealth
                                 o New aircraft models lead to increased
                                 deliveries
                                 o A large number of aircraft retirements are
                                 expected
                                 o Markets outside the U.S. are ramping up
                                 o No substantive air taxi network
                                 o Demand for very light jets resulting from a
                                 shift from turboprops

    Source: GAO analysis of very light jet forecasts.

    Each of the eight forecasts we reviewed included assumptions about the
    effect of economic growth and the expansion of the air taxi market. The
    forecasts all assumed moderate to strong economic growth, while
    assumptions regarding the air taxi market varied considerably. For
    example, the Teal Group forecast predicted the air taxi market would not
    expand on a large scale. However, several other forecasts included
    predictions of several thousand very light jet deliveries to air taxi
    operators. For example, Embraer forecasted that the air taxi market might
    be responsible for 2,500 to 3,000 very light jet deliveries by 2016 if
    there is demand for air taxi services.

    In addition, very light jet forecasts included assumptions regarding other
    factors:

               o Replacement market. Customers may purchase very light jets to
               upgrade from existing aircraft, which could affect the number of
               very light jet deliveries. There is also an expectation that a
               large number of aircraft will be retired in the future, which
               could create further demand for very light jets to replace aging
               aircraft.
               o Large number of aircraft models. The large number of very light
               jet models gives customers more options to choose from and might
               strengthen demand. For example, Rolls-Royce notes that there tends
               to be a high correlation between total aircraft deliveries and the
               number of models on the market.

               In addition to the information gathered from the forecasts, we
               asked 18 aviation experts from the federal government, academia,
               aviation equipment manufacturers, industry associations, air taxi
               operators, and aviation insurance companies to identify factors
               they thought would most impact the number of very light jet
               deliveries over the next 10 to 20 years.10 The factor mentioned
               most often was the growth in the air taxi market, which could
               significantly affect very light jet demand if successful. However,
               several experts did not think air taxi operations will succeed on
               a large scale and noted that the on-demand business model is
               nothing new. They argued that if the point-to-point on-demand air
               taxi business model were so attractive, it could have become
               popular already using similar existing business jets and propeller
               aircraft.

               The 18 experts also identified several other factors that they
               thought might influence very light jet demand, including:

               o Dissatisfaction with other forms of transportation. Increased
               hassle associated with commercial airline and automobile travel
               may lead to higher demand for very light jets.
               o Low purchase price and operating costs. The relatively low costs
               of acquiring and operating very light jets may lead to increased
               demand.
               o Access to airports with the appropriate infrastructure.
               According to aircraft manufacturers, very light jets will be able
               to use a relatively large number of private and public airports,
               which could help increase demand. However, infrastructure needs,
               such as hangar space and availability of ground transportation,
               may limit access to these airports and thus limit demand for very
               light jets. Difficulty accessing metropolitan airports, which are
               already congested, might also limit demand for these aircraft.

    10The aviation experts we interviewed were not selected randomly, and
    their views and opinions cannot be generalized to the larger population of
    experts and aviation officials. (See app. I for a discussion of scope and
    methodology.)

               o Training and insurance requirements. The time and money needed
               to achieve the necessary levels of training and insurance could
               become burdensome to potential pilots and limit demand to some
               extent.
               o Production constraints. The ability of aircraft manufacturers to
               produce enough very light jets to meet demand may influence the
               number of aircraft delivered.

    			  Limited Information Is Available for Forecasting Very Light Jet
    			  Deliveries

               The very light jet forecasts we reviewed were primarily from the
               forecasters' own expert opinions about potential markets and
               business models, but the forecasters had limited information on
               which to make their predictions about very light jet deliveries.
               For example, since very light jet manufacturers have just begun
               delivering the new aircraft, there is little information about
               product demand. Forecasters indicated that they based their
               assumptions about very light jet demand on information about past
               deliveries for other aircraft in comparable price classes, such as
               light jets and turboprop airplanes; however, these aircraft do not
               have exactly the same performance characteristics as very light
               jets. For example, several forecasts examined the markets for
               turboprop aircraft and predicted the proportion of customers who
               might instead purchase new very light jets.

               In addition, forecasts were based on limited information regarding
               the air taxi market. There is an ongoing debate about the extent
               to which the availability of very light jets will facilitate an
               expansion of the air taxi market. Some aviation experts stated
               that very light jets will reduce acquisition and operating costs
               compared with other business jets, which will enable a number of
               variations on current on-demand air taxi and air charter business
               models. However, the first delivery to an air taxi company took
               place at the end of March 2007. Without past market information,
               it is difficult to predict the overall effect of air taxi
               operations on the number of very light jet deliveries.

               We compared very light jet forecasts to more general business jet
               forecasts and found that there was less consensus among
               forecasters about the expected number of very light jet deliveries
               than there was about other aircraft deliveries, which demonstrates
               the divergence of opinion about very light jet deliveries.
               Specifically, four of the eight organizations with very light jet
               forecasts that we examined also produced overall business jet
               forecasts for the years 2015 to 2016.11 The range in the predicted
               number of very light jet deliveries for these four forecasts is
               from 3,016 to 5,715 aircraft, an approximately 47 percent
               difference. However, the range in predicted number of other
               business jet deliveries for the forecasts was much closer, from
               7,000 to 8,984 aircraft, only an approximately 22 percent
               difference.12

               We also examined four past very light jet forecasts and found that
               they did not accurately predict very light jet deliveries. For
               example, in February 2006, FAA predicted 100 very light jets would
               enter the active air fleet during fiscal year 2006, but
               manufacturers did not deliver any very light jets during the
               fiscal year. The other three forecasts also overestimated the
               number of very light jet deliveries for 2006. In addition, in
               2002, the Transportation Research Board and FAA sponsored an
               aviation expert workshop, which suggested up to 5,000 very light
               jets may arrive by the year 2010. Yet none of the eight current
               very light jet forecasts that we examined predict 5,000 deliveries
               over the next 3 years.

    11The Rolls-Royce forecast predicts very light jet and overall business
    jet demand in 2025 and was considered an outlier for the purposes of this
    illustration.

    12Percent differences were calculated by subtracting the lowest number in
    the range from the highest number and then dividing the result by the
    highest number of the range.

               Studies and Expert Opinions Varied on How Very Light Jets Will
    			  Affect Capacity, but Most Experts Believe Very Light Jets Will
    			  Have Little Effect on Safety

               Two studies we reviewed and 20 experts we contacted had various
               opinions regarding how very light jets will affect NAS capacity;
               the experts believed that very light jets would have little effect
               on safety.13 The studies indicated that the effect of very light
               jets on capacity will be determined to some extent by the type and
               location of airport they use. Many experts believed very light
               jets will travel to small airports, such as reliever and general
               aviation airports, and will have little effect on the capacity and
               safety of the NAS.14 A few experts believed very light jets will
               travel to large airports, such as hub airports, and have a
               significant effect on capacity through increased air traffic
               operations. In addition to airport type, experts indicated the
               effect of very light jets on the NAS depends on other factors
               including: uses of very light jets entering the NAS, trip length
               and flight altitude, implementation of new air traffic control
               technologies and equipment, and aircraft performance capabilities.
               Most of the experts we contacted indicated that very light jets
               will likely have little overall effect on safety.

    			  Studies and Experts Identified Factors That Would Influence Very
    			  Light Jets' Effect on Capacity

               The two studies we reviewed--one by the National Aeronautics and
               Space Administration (NASA) and one by the Massachusetts Institute
               of Technology (MIT)--indicated that the type and location of
               airports used by very light jets will influence very light jets'
               effect on capacity.15 However, the studies differed in results
               because of, among other things, differing assumptions. The NASA
               study assumed that very light jets would not travel to hub
               airports because of the cost and congestion involved in flying to
               these airports.16 The NASA study found that very light jets used
               for air taxi operations could increase commercial delays for the
               year 2025 by an estimated 1.3 percent if very light jets do not
               use hub airports. The NASA study also looked at a scenario in
               which very light jets are not excluded from hub airports that have
               significant general aviation traffic today, although the study
               concluded that this was an unlikely scenario. NASA concluded that,
               under such a scenario, the increase in total delay for commercial
               passenger flights could be as much as 9.8 percent. The MIT study
               predicted that very light jets used as air taxi services,
               fractional ownership programs, recreational flights, and freight
               carriers will have a significant effect on air traffic growth at
               high activity airports including hubs located within metropolitan
               areas. The study concluded that some of these airports will
               ultimately reach their capacity limit. The MIT study assumed that
               very light jets' performance and capabilities would be similar to
               the performance of light jets and found that very light jets would
               operate at the top regional airport systems that currently exhibit
               high density and capacity constraints. MIT also found that very
               light jets will not significantly affect airports outside of
               metropolitan areas because these airports have excess runway
               capacity to handle additional aircraft. The study indicated that
               very light jets will increase controllers' workload because of
               very light jets' lower climb performance and cruise speed compared
               to other jets in the en route environment. As a result, the study
               noted that air traffic controllers will need to separate very
               light jets from faster traffic in high density routes between
               large cities such as New York City and Chicago, which could
               increase delays.

    13The aviation experts we interviewed were not selected randomly and their
    views and opinions cannot be generalized to the larger population of
    experts and aviation officials. (See app. I for more information.)

    14Reliever airports are airports that must have 100 or more based aircraft
    or 25,000 annual itinerant operations, and that provide operators such as
    general aviation aircraft an alternative to using hub airports. General
    aviation airports are airports not classified as commercial service.

    15National Aeronautics and Space Administration, The Effects of Very Light
    Jet Air Taxi Operations on Commercial Air Traffic, NASA/CR-2006-214519
    (Hampton, Virginia; October 2006); and Massachusetts Institute of
    Technology, Investigation of the Potential Impacts of the Entry of Very
    Light Jets in the National Airspace System (Cambridge, Massachusetts; Oct.
    30, 2006).

    16A hub airport is a primary airport that has 0.05 percent or more of all
    annual U.S. enplanements.

               In addition to the studies, we also spoke with experts from
               federal agencies, industry associations, academia, and others who
               indicated that the extent of very light jets' effect on capacity
               depends on numerous factors. Similar to the NASA and MIT studies,
               the experts believed that the type of airport at which very light
               jets would operate was a key factor influencing the effect on
               capacity. Many experts we spoke with believed that very light jets
               would operate at reliever and general aviation airports, where
               they could have little effect on capacity because of excess runway
               capacity at these airports. However, a few of these experts noted
               that even though very light jets may not operate at hub airports,
               their use of secondary airports near major metropolitan airports
               could affect capacity by increasing commercial delays. Other
               experts believed that very light jets would operate at hub
               airports with significant airline traffic, which could negatively
               affect capacity by causing airline delays.

               The experts we contacted also identified other factors influencing
               very light jets' effect on capacity, including the following:

               o Uses of very light jets in the airspace. The various ways that
               very light jets might operate in the NAS, such as an air taxi or
               recreational aircraft, will help to determine the extent of their
               effects on capacity. Very light jets operating as air taxis will
               likely have a greater effect on capacity as opposed to other users
               because of a higher utilization rate in the NAS.17 In FAA's 2007
               forecast, the agency assumed that very light jets operating as air
               taxis will average 1,500 hours per year, fractional owners 1,200
               per year, and recreational use 350 hours per year.18 Very light
               jets operating as recreational aircraft would likely have less
               effect on capacity due to lower utilization rates and operating at
               general aviation airports with excess runway capacity.
               o Trip length and altitude of very light jet flights. Very light
               jets might operate shorter flights and travel at lower altitudes
               than commercial planes and have little effect on capacity. If many
               very light jets fly at higher altitudes and longer distances, they
               could have a greater effect on capacity, resulting in delays and
               congestion.
               o Implementation of new air traffic control technologies and
               equipment. Very light jets likely will be equipped with new
               technologies and equipment, such as Automatic Dependent
               Surveillance-Broadcast (ADS-B) that, once deployed by airports
               nationwide, would help to increase capacity by providing position,
               intent, velocity, and other information between aircraft and
               ground systems to manage air traffic.
               o Performance capabilities of very light jets. Very light jets
               have slower climb rates and cruising speeds than commercial
               airlines, which could influence their effect on capacity when
               mixing with other aircraft in the terminal and en route
               environments. FAA and several experts, including experts
               representing active air traffic controllers, believe that very
               light jets will increase the complexity of the airspace due to
               their performance capabilities. FAA indicated that controllers
               will segregate very light jet traffic from airline traffic if they
               travel in the same airspace.
               o Rate of integration of very light jets. FAA officials told us
               that they do not expect very light jets to significantly affect
               capacity in the next 5 to 6 years because of the incremental
               integration of very light jets into the airspace. FAA assumes that
               400 to 500 very light jets will enter the NAS annually starting in
               2008.

    17Utilization rate is the average number of hours an aircraft is flown per
    year. Some references cite revenue hours as opposed to total hours.

    18Federal Aviation Administration, FAA Aerospace Forecasts Fiscal Years
    2007-2020 (Washington, D.C.; March 2007).

               Very Light Jets Will Likely Have Little Effect on Safety, According
    			  to Experts

               The experts we contacted believed very light jets will likely have
               little overall effect on safety due to FAA's certification
               processes and procedures for aircraft, pilots, and maintenance and
               the advanced technology used to navigate the aircraft. In
               addition, several experts stated that very light jets do not cause
               safety concerns because they will operate like existing aircraft
               in the airspace. However, FAA and some experts noted that very
               light jets could introduce safety concerns such as recreational
               pilots' lack of experience flying jets. To address these concerns,
               FAA and the aviation industry have established guidelines for
               developing pilot training programs for very light jets and a
               voluntary scenario-based training to enhance general aviation
               safety. Aviation insurance companies, along with very light jet
               manufacturers, are working together to institute a proficiency
               index to assess pilots' experience and training needs and develop
               programs such as mentor pilot training for new pilots of very
               light jets.19

    			  FAA Officials Believe Procedures and Policies Are in Place to
    			  Accommodate Very Light Jets, but FAA Is Taking Steps to Prepare for
    			  Their Introduction

               FAA officials stated that procedures and policies are in place to
               successfully integrate very light jets into the NAS because very
               light jets will operate similarly to other aircraft and will enter
               incrementally. Nonetheless, FAA is taking several steps to address
               issues associated with very light jets, including the development
               of a cross-organizational group to facilitate coordination, as
               well as collaborating with air taxi operators and providing
               information to air traffic controllers. FAA officials and aviation
               experts also believe very light jets will benefit from new
               technologies and procedures being developed as part of FAA's
               modernization efforts.

    19The mentor pilot training is used to, among other things, observe a
    pilot's handling of aircraft and use of automation and provide feedback to
    the pilot.

               FAA Officials Stated They Have Procedures and Policies in Place to
    			  Handle the Introduction of Very Light Jets

               According to FAA officials, existing aviation standards and
               regulations are adequate to successfully integrate very light jets
               into the NAS. These officials and several other experts agreed
               that very light jets are similar to other aircraft currently in
               operation and do not require substantial changes to existing
               procedures and policies. For example, very light jets are required
               to meet aircraft certification standards set out in Federal
               Aviation Regulations Part 21 and 23.20 These regulations set out
               certification procedures and airworthiness standards for aircraft
               weighing less than 12,500 pounds and will be applied to new very
               light jets, according to FAA officials. FAA also stated that, as
               part of the certification process, it will meet with manufacturers
               to outline "special conditions," which are specific requirements
               developed for those aircraft seen by FAA as using novel or unique
               technologies. The two very light jet models currently operating in
               the NAS--the Eclipse 500 and the Cessna Citation Mustang--were
               required to pass these certification and airworthiness standards,
               including special conditions. In addition to aircraft
               certification requirements, FAA is responsible for establishing
               and enforcing standards for the certification of pilots and
               instructors as well as maintenance technicians and repair
               stations. These standards are based on the complexity and
               classification of the aircraft and type of operation.21

               Although there may eventually be thousands of very light jets in
               the NAS, FAA stated that these aircraft are expected to enter
               incrementally, which will allow for their gradual integration into
               the NAS. Several forecasters and FAA are predicting fewer than 400
               very light jets will be delivered in 2007. FAA officials also
               noted that very light jets are currently entering the NAS at a
               slower rate than many previously predicted.

    			  FAA Is Taking Steps to Prepare for the Introduction of Very Light Jets

               Although FAA officials believe they have policies and procedures
               in place to accommodate the integration of very light jets into
               the NAS, FAA is taking several steps to specifically address
               issues arising from an increased number of very light jets.
               According to one FAA official, the agency is taking these steps as
               a precautionary measure to ensure that very light jets are
               integrated smoothly. For example, in July 2005, FAA developed a
               cross-organizational group to identify and address issues
               regarding very light jets related to the following: pilot training
               and checking, inspector training, flight operations, maintenance,
               and air traffic. The cross-organizational group includes
               approximately 35 representatives from numerous lines of business
               and service organizations within FAA, such as the Air Traffic
               Organization--responsible for moving air traffic safely and
               efficiently--and Flight Standards Service--responsible for setting
               certification standards and oversight of pilots, aircraft
               operators, and designees. According to one FAA official, the
               cross-organizational group was formed to communicate ideas across
               FAA departments, as a way to avoid coordination problems. FAA
               officials also stated that the cross-organizational group has
               developed inspector training for several of the new very light
               jets, conducted briefings to air traffic controllers on very light
               jet performance characteristics, and is working with manufacturers
               and air taxi operators on an ongoing basis.

    2014 C.F.R. SS 21 and 23. Part 21 is Certification Procedures for Products
    and Parts. Part 23 is Airworthiness Standards: Normal, Utility, Acrobatic,
    and Commuter Category Airplanes.

    21FAA inspectors with oversight responsibilities for more complex aircraft
    and types of operation must meet higher minimum qualifications, including
    additional training and experience. For example, standards are higher for
    an aircraft requiring a type rating. In addition, operations in which
    passengers are carried for hire are more stringently regulated than
    flights solely for personal use. Private pilots may not carry passengers
    for hire.

               Aside from the cross-organizational group, FAA is conducting
               several other activities including:

               o Continuing to work with an industry association to bring air
               taxi operations into the collaborative decision making process.22
               o Continuing to make air traffic control centers aware of any
               unique very light jet operational requirements through bulletins,
               briefings, and traffic management courses.
               o Establishing a very light jet computer simulation model for use
               during qualification and annual refresher training for air traffic
               controllers.
               o Planning to conduct operational test flights with DayJet to
               observe a very light jet as it works through the airspace
               environments.
               o Conducting a wake turbulence study to examine potential impacts
               of turbulence generated by large aircraft on very light jets.
               o Funding research on the potential effect of very light jets on
               U.S. airports, including an examination of future operations by
               category of airport, geographic location, and type of operation,
               as well as potential infrastructure, facilities, and services that
               particular airports will need to accommodate future very light jet
               activity.

    22Collaborative decision making is a joint government/industry initiative
    aimed at improving air traffic management through increased information
    exchange among the various parties in the aviation community. The
    collaborative decision making program is made up of representatives from
    government, general aviation, airlines, private industry, and academia who
    are working together to create technological and procedural solutions to
    traffic flow problems that face the NAS.

               FAA stated that a large influx of very light jets might
               necessitate the reallocation of inspector resources. FAA is aware
               of this challenge and has developed an Aviation Safety Workforce
               Plan. FAA is planning on redeploying resources to meet demand as
               needed, according to the official we contacted. Discussions are
               ongoing with the local Flight Standard District Offices where FAA
               is expecting to see increased demand for inspectors, such as in
               Albuquerque, New Mexico, where Eclipse Aviation is based. FAA
               officials also stated they have developed a course to train
               maintenance and avionics inspectors at these locations. However,
               GAO noted in 2006 that very light jets could create workload
               challenges for FAA inspectors to expeditiously issue and monitor
               certificates.23 In addition, aviation experts have raised concerns
               about the number of FAA inspectors. For example, in a May 2007
               testimony, the Inspector General of the Department of
               Transportation reported that 28 percent of FAA's inspector
               workforce is eligible to retire this year and that FAA will face
               oversight challenges as large numbers of very light jets begin to
               operate in the NAS. Other aviation experts with whom we spoke also
               expressed concern over certification delays arising from limited
               FAA inspector resources. According to FAA, the number of safety
               inspectors increased between fiscal year 2005 and fiscal year 2006
               and the agency plans to continue to increase its inspector
               workforce through fiscal year 2008.

    			  FAA Officials Believe That NAS Modernization Will Accommodate Very
    			  Light Jet Demand for FAA Services

               FAA stated that NAS modernization efforts and new technologies
               will improve efficiency and safety for all aircraft, including
               very light jets. FAA and other government agencies are developing
               the Next Generation Air Transportation System (NextGen), which is
               intended to provide services to what is expected to be two to
               three times more air traffic in 2025 compared with today, while
               being agile enough to accommodate a changing fleet that includes
               very light jets.24 According to the FAA, NAS modernization will
               reduce congestion, assist with separation standards, and increase
               overall system capacity. Aviation experts and very light jet
               manufacturers we spoke with stated that very light jets have
               advanced avionics and are expected to be able to take full
               advantage of NextGen systems.

    23See GAO, Aviation Safety: FAA's Safety Efforts Generally Strong but Face
    Challenges, [31]GAO-06-1091T (Washington, D.C.: Sept. 20, 2006).

               Eleven of the 14 aviation experts we spoke with regarding FAA's
               plans to integrate very light jets into the NAS noted that FAA
               needs to continue to adopt and implement new technologies to
               maintain system capacity. Experts stated that the current air
               traffic control system is antiquated and cannot be scaled up to
               meet projected increases in air traffic. Experts encouraged FAA to
               adopt and implement NextGen technologies, such as ADS-B, at a
               rapid pace to maintain current system capacity. FAA and aviation
               experts also pointed to the importance of continuing to develop
               more precise routes through Area Navigation and Required
               Navigation Performance procedures, which, according to FAA, may
               increase system capacity and safety by enabling closer aircraft
               spacing with less intervention from air traffic control.

    			  Several Factors Will Influence the Effect of Very Light Jets on
    			  FAA's Costs and Trust Fund Revenues

    24GAO has reported that the NAS is expected to accommodate a variety of
    new aircraft, such as the jumbo Airbus A380, which can hold more than 500
    passengers. See GAO, Commercial Aviation: Potential Safety and Capacity
    Issues Associated with the Introduction of the New A380 Aircraft,
    [32]GAO-07-483 (Washington, D.C.: Apr. 20, 2007).

    25FAA incurs costs for other services it provides, such as aircraft
    maintenance or certification, but we have limited our examination of the
    effect on FAA's costs to those costs associated with the provision of air
    traffic control services.

               The effect of very light jets on FAA's costs to provide air
               traffic control services25 and on Trust Fund revenues will depend
               on several factors in addition to the number of very light jets
               deployed, such as the extent to which they replace existing
               aircraft and how their use is distributed between commercial and
               noncommercial operations. One critical but particularly
               speculative factor likely to affect FAA's costs and revenues is
               the extent to which a market for air taxi service using very light
               jets will develop. Both the administration and Congress have
               proposed changes in the current funding structure for FAA for
               fiscal year 2009, which, if adopted, would affect how very light
               jet operators are taxed.

    			  Several Factors Will Influence the Effect of Very Light Jets on FAA's
    			  Costs

               A number of factors will determine the effect on FAA's costs of
               introducing very light jets into the NAS. Several of these factors
               suggest that FAA's costs might increase, although the extent of
               any increase is uncertain at this time. Factors include what type
               of aircraft, if any, very light jets will replace; the type of
               operations for which very light jets will primarily be flown; and
               where and when very light jets are flown. However, there is enough
               uncertainty about these factors to make the overall effect on
               costs unclear. For example, if flights using very light jets
               replace flights using other high-performance aircraft (such as
               another business jet or turboprop aircraft) on a one for one
               basis, there may be little or no net effect on FAA's costs because
               they would be replacing flights that, according to FAA, impose
               similar costs on the air traffic control system.26 However, there
               are at least three scenarios where FAA's costs would rise with the
               introduction of very light jets. First, if very light jet flights
               replace flights made with piston engine aircraft--again on a one
               for one basis--FAA's costs may increase because, according to FAA,
               controlling a high-performance aircraft such as a very light jet
               generally requires more complex air traffic equipment and
               procedures than needed to control a piston engine aircraft. These
               additional requirements arise because of differences in flight
               characteristics between the types of aircraft. For example, jets
               are more likely than piston engine aircraft to be flown under
               instrument flight rules at a higher altitude. Second, because of
               the smaller number of passengers that can be carried on very light
               jets, these flights could replace other high-performance flights
               on a more than one for one basis. In such cases, FAA's costs could
               rise as it would have to control more flights to carry the same
               number of passengers. Third, flights by very light jets that would
               be new flights not previously made (e.g., a business traveler who
               used to drive to a meeting 200 miles away and begins using an air
               taxi service or a small corporation that purchases a very light
               jet as its first corporate plane) will require services from FAA's
               air traffic control system that had not been required previously,
               increasing costs for FAA.

    26In January 2007, FAA released a new cost allocation study. This report
    sets forth a methodology for assigning air traffic costs to user groups on
    the basis of aircraft type. The two principal user groups are the
    high-performance group, which includes all fixed-wing turbine engine
    aircraft operations, and the piston engine aircraft group, which includes
    piston engine fixed-wing aircraft operations and helicopters. According to
    FAA, this cost allocation methodology is based on the assumption that
    high-performance users generally compete for the same air traffic control
    resources and their operations are more time-sensitive than piston
    aircraft operations, requiring more complex air traffic equipment and
    procedures. Piston aircraft operations, on the other hand, tend to be less
    time-sensitive and typically rely on less complex equipment. Differences
    in speed and cruising altitudes of the two aircraft types also affect
    their en route costs. Federal Aviation Administration, FY2005 Cost
    Allocation Report (Washington, D.C.; Jan. 31, 2007).

               The type of operations for which very light jets are
               flown--noncommercial or commercial--will also be a factor that
               will affect FAA's costs. If current trends hold, very light jets
               used in noncommercial service (e.g., corporate jets) would have a
               lower utilization rate--approximately 300 hours per year for each
               corporate aircraft according to FAA's 2005 data--and cost FAA
               around the same as current jet aircraft used in noncommercial
               operations. Very light jets used for commercial operations (e.g.,
               air taxis) would entail higher costs because of the higher
               utilization rates. It is unclear at this point in time, however,
               what percentage of very light jets will be used for commercial
               operations and what will be the utilization rates for air taxi
               operators. In 2005, according to FAA data, air taxi operators used
               each aircraft on average 413 hours per year. But some air taxi
               operators are anticipating that that they will fly a very light
               jet up to 1,500 revenue hours per year--substantially more than
               current commercial air taxi operators. Such use of very light jets
               could significantly affect FAA's costs.

               Another factor that will affect FAA's costs is the extent to which
               very light jets will compete for resources currently provided to
               other aircraft. That is, very light jets might impose more costs
               if they are used more frequently where and when there is
               substantial congestion in terminal airspace. If they are most
               commonly used at less congested airports or at less busy times of
               the day, then the additional costs to FAA might be less, even if
               their use leads to a total increase in the number of flights.

    			  Several Factors Will Influence the Effect of Very Light Jets on Trust
    			  Fund Revenues

               Several factors about which there is uncertainty--including some
               of the same ones that will impact FAA's costs--would influence the
               effect of very light jets on Trust Fund revenues. These factors
               include the distribution of flights between commercial and
               noncommercial operations, whether the flights replace existing
               flights on a one to one basis or represent additional flights, and
               whether there is a rapid expansion of the air taxi market.

               FAA currently is funded from two sources: the Trust Fund and the
               General Fund.27 The Trust Fund collects revenues from a series of
               aviation-related excise taxes, including taxes on airfares and
               fuel. The distribution of very light jet flights between
               commercial and noncommercial operations would affect Trust Fund
               revenues because very light jet operators would be responsible for
               different excise taxes depending on the purpose of the flight.
               Commercial operators, such as air taxi and charter operators, pay
               passenger ticket taxes, passenger segment taxes, and fuel taxes.
               Noncommercial business, corporate, and personal users pay only
               fuel taxes, but the fuel tax rate is higher than for commercial
               operations (see table 3). Very light jets used for commercial
               purposes could provide more revenue to the Trust Fund than those
               used for business or corporate use. The overall effect on revenues
               depends on miles traveled, number of passengers, fares charged,
               and other factors that are uncertain at this time.

               Table 3: Estimated Excise Tax Contribution for a Very Light Jet by
               Type of Flight

    Approximately 300-mile flight from Tallahassee to Boca Raton
                                    Air taxi service Corporate trip(noncommercial
                                    (commercial use)                         use)
    Number of passengers                        2                            2
    Average fare per                         $900                            a
    passenger
    Gallons of fuel used                      100                          100
    Passenger ticket                         $135                            a
    taxb
    Passenger segment                       $6.80                            a
    taxc
    Fuel taxd                               $4.30                       $21.80
    Total tax revenue                     $146.10                       $21.80

               Source: GAO analysis of FAA and industry data.

               aNot applicable.

               bThe passenger ticket tax is 7.5 percent of the ticket price.

               cThe passenger segment tax is $3.40 per passenger segment during
               calendar year 2007. Each segment consists of one takeoff and
               landing.

               dThe commercial fuel tax is $0.043 per gallon and the
               noncommercial jet fuel tax is $0.218 per gallon.

    27The General Fund historically has been used to pay for portions of FAA's
    budget, with contributions towards the agency's overall budget averaging
    about 20 percent in recent years.

               In cases where the very light jet is purchased as a replacement
               aircraft, the effect on the Trust Fund's revenues depends on the
               use of the aircraft they are replacing. If the very light jet is
               used in a similar manner to the aircraft it replaces, there may be
               little to no net change in revenue. If the very light jet is used
               for a purpose different from the aircraft it is replacing, there
               could be more or less revenue depending on comparative uses. Very
               light jets that provide additional flights rather than replace
               flights made by existing aircraft will provide additional excise
               tax revenue.

               Successful expansion of the air taxi market would affect the Trust
               Fund's revenues because some operators predict substantial
               increases in aircraft utilization rates. As discussed above, some
               commercial operators predict that very light jets used in
               commercial air taxi operations would be flown more frequently than
               in current air taxi operations thereby generating relatively more
               fuel and passenger ticket tax revenue. A couple of aviation
               experts suggested that successful air taxi operations may attract
               new passengers who currently travel by automobile, potentially
               leading to increased demand for commercial flights and additional
               revenue. However, experts suggested that successful air taxi
               operations could reduce revenue from traditional commercial
               airlines if they encourage first class passengers to travel by air
               taxi instead. At this time, however, the implication for Trust
               Fund revenue is unclear because the air taxi model has yet to
               prove itself. According to FAA officials, it will be at least 10
               years before there is an observable decrease in the number of
               commercial airline flights because of passengers transferring to
               air taxi operations, though effects on revenue could appear
               earlier.

    			  Reauthorization Proposals Call for Changes to Funding Structure

               In February 2007, the administration submitted a proposal for
               reauthorizing FAA and the excise taxes that fund most of its
               budget, which called for a mix of user fees and fuel taxes for the
               purpose of providing a more stable and cost-based funding
               structure. Congress is considering alternatives to the
               administration's proposal. For example, the Senate Commerce,
               Science, and Transportation Committee has reported out legislation
               that would retain the existing excise taxes but add a
               modernization surcharge of $25 that would be imposed on most jet
               aircraft flights, with some exceptions.28 The House Transportation
               and Infrastructure Committee has reported out its own version of
               the FAA reauthorization bill, H.R. 2881, which also does not
               impose user fees as the administration recommended.29 A
               recommendation from the House Committee on Transportation and
               Infrastructure to the House Committee on Ways and Means to
               increase the tax rates for general aviation jet fuel and aviation
               gasoline would increase Trust Fund revenues. As with the current
               funding structure, there is too much uncertainty about very light
               jets to accurately compare the revenue effects of these proposed
               alternative funding structures, other than to note that the
               factors discussed in the previous section would continue to affect
               revenues.

    28S.1300, 110th Cong., 1st Sess. S 106 (May 3, 2007). Exceptions to the
    $25 surcharge include, among others, military and public aircraft, air
    ambulances, piston engine aircraft, and turboprop aircraft operating
    outside of controlled airspace.

               Agency Comments

               We provided a draft of this report to the Department of
               Transportation for review. We received comments and technical
               clarifications by e-mail from FAA's Office of the Associate
               Administrator for Airports, Office of the Associate Administrator
               for Aviation Safety, and Air Traffic Organization, which we
               incorporated into the report as appropriate.

               We are sending copies of this report to the appropriate
               congressional committees, the Secretary of Transportation, and the
               FAA Administrator. We also will make copies available to others
               upon request. In addition, the report will be available at no
               charge on the GAO Web site at http://www.gao.gov.

    29H.R.2881, 110th Cong., 1st Sess. (June 27, 2007).

               If you or your staff have any questions about this report, please
               contact me at (202) 512-2834 or flemings@gao.gov. Contact points
               for our Offices of Congressional Relations and Public Affairs may
               be found on the last page of this report. GAO staff who made key
               contributions to this report are listed in appendix II.

               Susan Fleming
    			  Director, Physical Infrastructure Issues

    			  Appendix I: Objectives, Scope, and Methodology

               We examined (1) the current forecasts for very light jet
               deliveries and the factors that contribute to the differences
               among the forecasts, (2) the potential effect very light jets may
               have on capacity and safety of the National Airspace System (NAS),
               (3) the Federal Aviation Administration's (FAA) plans for
               accommodating the entry of very light jets into the NAS, and (4)
               the potential effect very light jets may have on FAA's costs and
               Airport and Airway Trust Fund (Trust Fund) revenues.

               To identify current forecasts for very light jet production, we
               conducted a literature review of government, aviation industry,
               and academic publications and interviewed aviation industry
               experts, FAA officials, and academic experts. From these sources,
               we compiled a list of publicly and commercially available
               forecasts. We contacted the entities that produced the forecasts
               and obtained information about their forecasts. We developed
               criteria for selecting forecasts to include in our review. The
               forecasts we selected had to be published within the past 12
               months and estimate the number of aircraft for a specific
               timeframe. We did not include five predictions for very light jet
               deliveries because they did not include a timeframe or were demand
               models that provided multiple very light jet estimates based on a
               number of inputs. For example, Eclipse Aviation, a very light jet
               manufacturer, had a prediction for potentially higher very light
               jet deliveries (8,995 annually) than any of the forecasts included
               in our analysis. This forecast, however, emphasized very light jet
               demand once the market hits maturity, but, since it did not
               indicate when that might happen, we did not include it in our
               review. We also did not include several dynamic growth models,
               which are capable of producing very light jet demand estimates for
               air taxi operations based on a number of changing inputs. Based on
               our criteria, we selected eight forecasts to include in our
               review, which were produced by FAA, the Teal Group, Honeywell,
               Rolls-Royce, Forecast International, PMI Media Limited, Embraer,
               and Velocity Group. We reviewed these forecasts and determined
               that they were sufficiently reliable for our purposes. We
               developed a data collection instrument to collect information from
               each of the forecasts (e.g., projected number of very lights,
               forecast date, underlying assumptions, factors affecting growth,
               etc.) and examined this information to identify similarities and
               differences among the forecasts. From this comparison, we
               identified the factors and assumptions affecting the total number
               of very light jet deliveries discussed most often. In order to
               obtain additional information about the factors that would affect
               the number of very light jets delivered, we contacted selected
               organizations and individuals with expertise in general and
               business aviation, including

               o federal government officials (FAA's Office of Aviation Policy
               and Plans, FAA's Flights Standards Service, National Aeronautics
               and Space Administration),
               o academic researchers (Virginia Polytechnic Institute and State
               University, Massachusetts Institute of Technology, George Mason
               University),
               o an air taxi service company (DayJet),
               o aircraft equipment manufacturers (Adam Aircraft, Eclipse
               Aviation, Pratt & Whitney),
               o aviation insurance companies (Global Aerospace, AIG Aviation),
               o an air traffic manager of a general aviation airport (Chicago
               Executive Airport),
               o an aviation consulting firm (Boyd Group), and
               o industry associations (American Association of Airport
               Executives, Aircraft Owners and Pilots Association, Air Transport
               Association, General Aviation Manufacturers Association, National
               Business Aviation Association).

               We developed the list of organizations to contact by interviewing
               experts from FAA and general aviation associations and asking for
               the names of other experts knowledgeable about issues affecting
               general and business aviation and about factors affecting very
               light jet production.

               To determine how increasing numbers of very light jets could
               affect the capacity and safety of the NAS, we reviewed government,
               academic, and aviation industry studies that described how very
               light jets might operate in the future and their potential effects
               on FAA's air traffic management system. We reviewed GAO reports
               and FAA regulations in order to obtain information about how FAA
               regulates general aviation aircraft safety and manages aircraft
               operations. We developed the list of organizations to contact by
               interviewing experts from FAA and general aviation associations
               and asking for the names of other experts who are knowledgeable
               about how general aviation aircraft currently operate and how very
               light jets could operate in the future. To obtain information
               about these issues, we contacted

               o federal government officials (FAA, National Transportation
               Safety Board, National Aeronautics and Space Administration),
               o academic researchers (Virginia Polytechnic Institute and State
               University, Massachusetts Institute of Technology, George Mason
               University),
               o an air taxi service company (DayJet),
               o aircraft equipment manufacturers (Cessna Aircraft Company, Adam
               Aircraft, Eclipse Aviation),
               o aviation insurance companies (Global Aerospace, AIG Aviation),
               o air traffic managers of general aviation airports (Chicago
               Executive Airport, Boca Raton Airport), and
               o industry associations (American Association of Airport
               Executives, Aircraft Owners and Pilots Association, Air Transport
               Association, General Aviation Manufacturers Association, National
               Business Aviation Association, National Air Traffic Controllers
               Association).

               We also asked the aforementioned agencies and organizations to
               identify factors that could influence the effect of very light
               jets on capacity and safety. We analyzed the responses and
               summarized the findings. Based on suggestions from these experts,
               we reviewed two studies conducted by the National Aeronautics and
               Space Administration and the Massachusetts Institute of Technology
               evaluating the effect of very light jets on the NAS and determined
               that they were sufficiently reliable for our purposes.

               To determine how FAA is planning to accommodate potential very
               light jet demand, we met with FAA officials from the Air Traffic
               Organization, Office of Aviation Policy and Plans, Flight
               Standards Service, and the very light jet cross organizational
               group to discuss FAA's current procedures for handling new
               aircraft and plans for additional action. We also discussed with
               FAA's Air Traffic Organization the agency's plans for transforming
               the air traffic control system to the Next Generation Air
               Transportation System (NextGen) and how this relates to the future
               entry of very light jet aircraft into the NAS. We reviewed GAO and
               FAA reports describing plans for implementing NextGen policies and
               technologies. To obtain information about what FAA should be doing
               to prepare for very light jets, we contacted selected
               organizations and individuals with expertise in general and
               business aviation, including

               o federal government officials (National Aeronautics and Space
               Administration),
               o academic researchers (Virginia Polytechnic Institute and State
               University, Massachusetts Institute of Technology, George Mason
               University),
               o an air taxi service company (DayJet),
               o aircraft equipment manufacturers (Adam Aircraft, Eclipse
               Aviation),
               o aviation insurance companies (Global Aerospace, AIG Aviation),
               o an air traffic manager of a general aviation airport (Chicago
               Executive Airport), and
               o industry associations (American Association of Airport
               Executives, Aircraft Owners and Pilots Association, Air Transport
               Association, General Aviation Manufacturers Association, National
               Business Aviation Association).

               To determine the potential effect of very light jets on FAA's
               costs and revenues, we met with FAA officials from the Office of
               Aviation Policy and Plans to discuss FAA's allocation of costs and
               the excise taxes that fund the Airport and Airway Trust Fund. We
               also discussed the administration's reauthorization proposal and
               how the proposed excise taxes could affect general aviation users.
               We reviewed the Senate and House reauthorization proposals for
               information about how they could affect general aviation users. We
               reviewed GAO and FAA reports for information about FAA's costs,
               excise taxes, and revenues. We interviewed aviation excise tax
               experts from the Internal Revenue Service to determine which
               excise taxes apply to different general aviation users.

               We conducted our work between September 2006 and July 2007 in
               accordance with generally accepted government auditing standards.

    			  Appendix II: GAO Contact and Staff Acknowledgments

    			  GAO Contact

               Susan Fleming, (202) 512-2834 or flemings@gao.gov

    			  Staff Acknowledgments

               In addition to the contact named above, key contributors to this
               report were Gerald Dillingham, Hal Brumm, Jay Cherlow, Matt Cook,
               Seth Dykes, Colin Fallon, Dave Hooper, Gail Marnik, Sara Ann
               Moessbauer, Faye Morrison, and Joshua Ormond.

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    (541028)

    [33]www.gao.gov/cgi-bin/getrpt?GAO-07-1001 .

    To view the full product, including the scope
    and methodology, click on the link above.

    For more information, contact Susan Fleming at (202) 512-2834 or
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    Highlights of [34]GAO-07-1001 , a report to congressional requesters

    August 2007

    VERY LIGHT JETS

    Several Factors Could Influence Their Effect on the National Airspace
    System

    For several years, a number of aviation manufacturers have been designing
    and testing very light jets, a type of small jet aircraft equipped with
    advanced technologies and priced below other business jets. Aviation
    forecasters predict that thousands of very light jets will enter the
    National Airspace System (NAS) over the next two decades, contributing to
    the overall growth of the general aviation fleet. While some experts
    predict that very light jets will be used in ways that are similar to
    current general aviation aircraft, others predict that they will be used
    to expand the air taxi market to provide on-demand, point-to-point air
    transportation. In 2006, the Federal Aviation Administration (FAA)
    certified the first very light jets for flight. This report identifies (1)
    current very light jet forecasts and what factors could affect very light
    jet deliveries, (2) how increasing numbers of very light jets might affect
    the capacity and safety of the NAS, (3) how FAA is planning to accommodate
    the entry of very light jets into the NAS, and (4) how very light jets
    might affect FAA's costs and Airport and Airway Trust Fund revenues. To
    address these issues, GAO reviewed relevant documents and interviewed
    agency officials and aviation experts.

    GAO is not making recommendations in this report. The Department of
    Transportation provided technical clarifications, which were incorporated
    as appropriate.

    The eight very light jet forecasts GAO examined provided a range of both
    the number of very light jets projected to be delivered (roughly 3,000 to
    7,600) and the dates by which those numbers would be reached (from 2016 to
    2025). The forecasts were based on limited information about the market
    for very light jets and varied based on a number of assumptions,
    particularly regarding the development of the air taxi market.

    The studies GAO reviewed and the experts GAO contacted expressed varying
    opinions about the impact of very light jets on NAS capacity; however,
    most of the experts believed that very light jets would have little
    overall effect on safety. The studies found that the type of airports used
    by very light jets will influence very light jets' effect on capacity.
    Experts also mentioned other factors that could affect capacity such as
    aircraft usage, trip length, and altitude. Most experts GAO contacted
    believed that very light jets will likely have little impact on safety due
    to FAA's certification procedures for aircraft, pilots, and maintenance.

    According to FAA officials, the agency currently has policies and
    procedures in place to accommodate the entry of very light jets into the
    NAS because the aircraft will operate similarly to other aircraft and will
    enter the NAS incrementally. Nonetheless, FAA is taking steps to address
    issues associated with very light jets by establishing a
    cross-organizational group to facilitate communication about very light
    jets across the agency. In addition, FAA expects that the deployment of
    modern air traffic management technologies will help to integrate very
    light jets in the long run.

    The impact of very light jets on FAA's costs and Trust Fund revenues will
    depend on factors such as the number of very light jets deployed, the
    extent to which they replace existing aircraft, and whether they
    facilitate a large-scale air taxi industry. The Congress is considering
    legislation that could affect how very light jets are taxed but, as with
    the current funding structure, there is too much uncertainty about very
    light jets to accurately compare the revenue effects of these proposed
    alternative funding structures.

    Examples of Very Light Jet Aircraft

    References

    Visible links
      24. http://www.gao.gov/cgi-bin/getrpt?GAO-07-793T
      25. http://www.gao.gov/
      26. http://www.gao.gov/
      27. http://www.gao.gov/fraudnet/fraudnet.htm
      28. mailto:fraudnet@gao.gov
      29. mailto:JarmonG@gao.gov
      30. mailto:Beckers@gao.gov
      31. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1091T
      32. http://www.gao.gov/cgi-bin/getrpt?GAO-07-483
      33. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1001
      34. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1001
    *** End of document. ***