"Keeping A Good Thing Going" Speech Is All About Changing FAA Funding

In her speech Wednesday before the US Chamber of Commerce Aviation Summit -- titled, somewhat ironically, "Keeping a Good Thing Going" -- FAA Administrator Marion Blakey states drastic funding changes are needed to insure the nation's air traffic control system is prepared to handle expected growth rates over the next 10 years. The Administrator also called on Chamber attendees to support the agency's proposed funding reauthorization plan.

Administrator Blakey notes positive growth among airlines and general aviation traffic alike... and says the situation the FAA faces today is not unlike issues faced by the GA community in the mid-90s, which led to the General Aviation Revitalization Act of 1994.

The unedited text of Ms. Blakey's speech follows below.

Before I go any further I have to say a resounding thank you to Tom [Donohue] and the Chamber for their help in some tough debates of late that, if they’d gone the wrong way, would’ve cost the aviation system a lot of money and set back our ability to operate efficiently and modernize air traffic control.

We’ve counted on Tom and the Chamber before, and they’ve always come through. I can tell you, you want them standing with you in a firefight.

It’s a great pleasure to be back. This makes — what? — three years in a row now I've been here? Well, let me tell you. Speaking to the Chamber is one of those things you always look forward to. You know business and aviation inside and out, and that's an audience I want any day.

Yes, we look at the landscape of our industry today and think, "Yeah … the summit theme is right on target … 'Ready for Takeoff.'"

If it's anyone who deserves credit for where we are today, it's all of you. Sometimes when I think of how much you do and how few kudos you get for it, I find myself reminded of a story about Orville and Wilbur and this whole notion of getting recognition.

They had tried repeatedly, as we all know, to get their flying contraption off the ground. They had one disappointment after another. And then finally, on that December day, there on and above the sands of Kitty Hawk, Orville did what no man had ever done before.

So the Wrights wire their sister, Katherine. Quote: "We have actually flown 120 feet. We'll be home for Christmas.”

Katherine ran all the way to the local newspaper and handed the wire to the city editor. He looked at it and said, "Well, isn't it nice? They're going to be home for Christmas."

The return of profitability in this industry has arrived with similar understatement. Look where we are today. The wobbly legs for the last couple of years are now regaining their footing.

One of Wall Street's most influential firms says: "We think 2007 could be an even better year than 2006 for most airlines. Industry fundamentals have not been this good in years." Yesterday, the Dow Jones Transportation Index closed sharply higher, based on the strength of the airline industry. US Airways is one of the carriers helping to drive the resurgence.

Now on the GA side, another great story. The latest industry figures show that shipments of every type — pistons, turboprops, bizjets — increased by double digits [13 percent, according to GAMA -- Ed.] in '06 from the year before. And total billings? They finished the year at $19 billion — an all-time high.

Yeah, things were on the brink there for awhile after 9/11. But today? Aviation's on a surge.

So the question, at least from where I stand, is does all this success mean we no longer need to change the way we jointly finance the aviation system or the FAA? The answer? Absolutely not.

Because unlike your companies, which tie their costs to revenues, we continue to operate under an antiquated tax system whose time has come and gone. Our current revenue system would have Rube Goldberg scratching his head.

The cost-based system we envision in our funding reform bill gives the FAA the two things we desperately need to keep pace with aviation — reliability and flexibility.

With them, we'll have a revenue stream that, for the first time, is steady and predictable, instead of one that's all over the map. In turn, we'd get the flexibility we need to fund capital projects, with the certainty that the money's going to be there for us to spend as the smart investments — that we all agree on — require. That's not the case now.

Taxes are locked in the law for a decade, and we raise what we raise. So even if the money's there over the long run, we're still subject to the year-to-year volatility that makes it hard to do business.

We don't believe there'll be enough revenue coming in early enough, and at the right points, to fund the NextGen and avoid gridlock. Under the current system, revenues that come in can always be held to offset the federal deficit.

The FAA's business model — plain and simple — is broken.

Let me ask you something. How many of you out there are from the GA community? Raise your hands. Good.

How many of you remember what it was like back in the 90s, when you needed legislation to revitalize your industry?

For a few of the rest of you who may not remember, here's a press release dated August 4, 1994. The headline is NBAA President Jack Olcott Calls Enactment of General Aviation Revitalization Act of 1994 'A Catalyst for a New Era in General Aviation.'

Olcott (right) goes on to call the new law quote "fair and balanced reform." Now fast forward to 2007. Same situation, but this time it's the FAA's revenue mechanism that needs revitalizing. We, too, need fair and balanced reform.

With the FAA having revenue drivers that are similar to our cost drivers, they more naturally move together. And, under a cost-based system, revenues can be adjusted and recalibrated as and when we need.

Like any capital-intensive business, you have to do long-term planning and spend money over a period of years. If the money's not there, and you don't even have the ability to borrow it — or take steps to increase revenues — then you're at a major disadvantage.

Can you imagine Bill Gates, Warren Buffett or any other CEO who'd willingly allow his company to be in that position? Yet that's where we are.

So let me put on my CEO cap for minute and walk all of you through an example of two flights that drive similar costs for the FAA, yet past vastly different amounts into the Trust Fund.

This lack of a connection between revenues and costs will help you see what I mean when I say that our business model is broken and it's time for a new way of doing business.

It's spring break across the country. You're going to take your family on a trip to Miami — just as soon as you stop into Washington for the aviation summit, of course.

Let's look at how much your commercial flight from LaGuardia to Miami is going to put into our Trust Fund coffers.

Factor in the ticket tax, segment tax, and the fuel tax, and we've got $2,015 coming in. Under our proposal, that same flight would pay 36 percent less in user fees and fuel taxes than under the current system. And that's because commercial users are already overcharged.

They currently pay 97 percent of the Trust Fund revenues while they drive 73 percent of the costs. GA, on the other hand, drives 16 percent of our costs, but contributes just 3 percent of revenues.

Our reform bill addresses this inequity and spreads costs more fairly to all users of the system.

Let's look at another example. You're an executive headed off to a corporate board meeting. The company's Gulfstream Four is headed to Tampa from Teterboro, about the same distance as that LaGuardia-Miami flight I mentioned a second ago.

The Gulfstream trip would put $236 in fuel taxes in the Trust Fund, about one-tenth of the commercial flight's contribution. This disparity will have an even greater impact as we move forward, because we expect GA jets will be the fastest-growing segment of aviation.

Getting back to that Gulfstream, it would now pay $837 under our legislation, mostly through fuel taxes. Continuing to pay through fuel taxes — this is something the GA community requested.

Now if a $500 rise in fuel taxes seems like a lot, contrast that with a few of the other costs of owning and operating a G-4. For starters, there's the 500 gallons of fuel burn an hour. If you're shelling out $5 a gallon, that's twenty five hundred right there.

Throw in parts, labor, maintenance, landing fees, parking fees, and you're looking at at least three grand an hour. Maybe more.

Now, if that G-4 I cited a minute ago lands at a non-hub airport — say St. Petersburg Clearwater — it would only pay fuel taxes. Not a dime in user fees.

Suppose you don't have a G-4 sitting around at your disposal. Let's say you like to tool around in a Bonanza 36. You're leaving Palwaukee Municipal in Chicago, headed to Kansas City Downtown Airport. Again, not a dime in user fees. Not one penny.

All in all, we're not even asking GA to pay their full share. Though they impose 16 percent of our costs — I alluded to this figure a minute ago — we're asking them to pay 11 percent, with the rest coming from the general fund.

So, with all that you've heard so far, now do you see why our financing mechanism won't bring us to NextGen fast enough?

To my knowledge — and you can check me on this — but to my knowledge, there's no other federal agency in the entire government that provides direct services to the public the way we do, but depends on a value-based tax — one that's unrelated to the costs of services that we provide.

Now there are other agencies that are funded by excise taxes. Take Federal Highways, for example. They're basically a grant program. They're not a service provider like we are. And the service that we provide — getting flights safely on their way — is quickly becoming constrained by gridlock.

As we speak, delays are mounting due to gridlocked airports and airspace. 2006 stands as the worst on record, with more than 490,000 flights that were late. This year isn't looking any better.

Through the first two months of '07, there've been 63,000 delays. We're going to have March's figures in a couple of weeks, and I can tell you, the news isn't good.

Looking well down the road, we predict delays will increase 62 percent by 2014 without NextGen. There's simply no way we can overcome congestion of this magnitude without transforming air traffic.

As you heard Charlie Leader earlier today, we must replace our outdated air traffic control architecture with a 21st Century satellite-based navigation system.

It'll safely handle dramatic increases in the number and type of aircraft using our skies, without being overwhelmed by congestion. We've begun putting some of the system's building blocks in place. But making the move to NextGen is going to require large, predictable investments.

Our current budget right now puts costs at $4.6 billion over the next 5 years, and a total of $15 to $22 billion through 2025. If you think that that's a lot, think of the costs of congestion.

Estimates are that by 2022, delays will cost our nation $22 billion each year in lost economic activity. That's a hit to each and every one of us. Think of what it'll be like when you can't make that business meeting because the system has come to a standstill.

Aviation has come too far for us to let it slip away. The question is — how do we sustain this momentum? How do we keep this good thing going?

Well, accepting important challenges is the Chamber's stock-in-trade, and so I have one for you today.

I want to conclude this afternoon by asking for your support for financing reform for aviation and the FAA. Let's keep aviation moving forward. I believe it'll make businesses more competitive and dynamic. And, it'll help us deal with some of the capacity challenges that threaten the vitality of our economy.

The aviation community knows more so than others how high the stakes are. If Congress doesn't act on our proposal by September when our taxes expire, we're all going to feel the pinch. And it's a pinch that's going to last for ten years. Thank you.

FMI: www.faa.gov, www.uschamber.com/ncf/events/aviation/default