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

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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 [email protected]. 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 [email protected]
			  
			  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
[email protected].

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:[email protected]
  29. mailto:[email protected]
  30. mailto:[email protected]
  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. ***