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Thu, Jan 26, 2006

SecTrans Mineta's Aero Club Speech Stirring Up Industry

E-I-C Note: The Secretary of Transportation gave a lunch-time speech Tuesday that seems to be stirring up some dust... already NATCA is shooting back with a full barrage and we expect others to follow suit.

As these factions make themselves known, it might behoove us all to take a look at the Secretary's speech, listed, unedited, below.

Remarks For The Honorable Norman Y. Mineta, Secretary Of Transportation
Aero Club Of Washington, Washington, DC
January 24, 2006, Noon

Thank you, Rob Land, for that kind introduction and for your strong leadership of the Aero Club. And I appreciate the warm welcome.

Each year, I look forward to this event. The Aero Club consistently attracts the top leaders of the aviation community, which makes this an ideal opportunity to reflect on where the industry that we all love is headed.

Jeff Shane and Marion Blakey are up here, and I can tell that they are getting nervous. “Mineta’s in a reflective mood again. Watch out! You know what happened in Shanghai.”

I may have stirred things up by thinking out loud two weeks ago. The point, of course, is that the airline industry and aviation itself are in a state of transition. And speculation aside, we do not know exactly how it will all shake out. But from the vantage point of a long career that has always had aviation at its core, I can tell you that bold thinking is in order – in the boardrooms of America’s airlines, as well as in Washington, D.C.

The changes occurring in our skies and coming down our runways combined with the security challenges of a post-9/11 world are so significant and so fundamental that temporary adjustments and band-aid solutions just won’t do.

With that imperative in mind, here at this forum two years ago, I announced the Next Generation Air Transportation System initiative.

Seeing our plans take shape is exciting. The architecture of the Next Generation system comes into clearer focus every day – a 21st Century system taking full advantage of the digital environment. We are raising our sights – from ground-based, to space-based navigation, communication, and surveillance.

Perhaps most exciting are the tangible results that the NextGen initiative is already producing. A good example is an approach that we call Network Enabled Operations, or NEO. In plain English, this system will ensure that all information regarding aircraft operations is directly available to everyone who needs it, whether it is the airline dispatcher, the FAA controller, or even a Federal Air Marshall or her colleague on the ground.

NEO was a key recommendation of the 9/11 Commission, and with good reason. Right now, unauthorized entry into the restricted airspace over the Nation’s capital is occurring much too frequently. Having a common operating picture will save precious minutes – perhaps precious lives – when an “aircraft of interest” or other abnormality is detected.

In addition to their security and safety implications, NEO and other NextGen technologies position us to use our airspace more efficiently, which is a must as we head toward more than a billion passengers by 2015, less than 10 years away.

Clearly, this move to a modern, technology-driven aviation system is going to require sustained investment.
It is going to bring operational changes to the cockpit, to the control tower, and to every inch of airspace in between.

So we in government have been putting ourselves through much the same exercise as the airlines themselves.

We have overhauled management, and brought in top talent.

Through the Air Traffic Organization and Management Advisory Council, the Federal Aviation Administration has become a performance-based organization, just as we envisioned in the National Civil Aviation Review Commission.

The FAA is doing some serious belt tightening, and has already cut some two thousand positions out of the ATO. But labor costs continue to comprise 80 percent of the FAA’s operating budget. And the biggest portion goes to pay the air traffic controllers.

The outcome of the current contract negotiations between the FAA and NATCA will fundamentally affect the FAA’s ability to meet the demands of a growing aviation system and hire the next generation of controllers.

The proposal that NATCA has on the table right now would cost the FAA more than $2 billion in additional personnel costs and expenses over the next five years. That is $2 billion that would not be available to help fund needed capacity improvements, modernization of our aging equipment, or the new controllers that we need to hire to replace the thousands who will be retiring.

We cannot afford this. You cannot afford this.

It is important that we achieve a deal that is fair to our employees, to the struggling aviation industry, and to the American taxpayer. That is our goal. And we are striving for a voluntary agreement. We continue to hope that NATCA shares the same goals.

And we are equally committed to giving America a sound financial plan for our aviation system, built around a sustainable, reliable revenue stream.

That is something that we do not have today. In fact, some of the changes occurring in aviation are making it increasingly difficult to fund our investments.

When we deregulated the airlines in the late 1970s, we understood – at least we hoped –that it would bring down ticket prices. And it has. At the end of 2004, ticket prices were 8.4 percent below their last peak in 2000.

We understood – at least we hoped – that it would lead to competition, and make air travel more convenient for the flying public. And it has.

But I do not think that, at the time, anyone fully recognized that this great news for travelers would have so severe an impact on our ability to finance aviation infrastructure.

We have learned. With our primary funding source tied to the price of a ticket, lower fares mean a smaller Aviation Trust Fund. And there is no real relation between the airline ticket tax and the cost or amount of service provided. As a result, in 2005, users paid over three-and-a-half billion dollars less than it cost to operate the system.

And the gap could widen. The Trust Fund is now at its lowest balance since 1977 (other than when the taxes expired in 1997).

Through the NCARC, we started looking at the FAA’s funding issues back in 1997.
And soon, the Bush Administration will propose a new, cost-based financing system for the FAA – our plan for locking onto a financial course capable of sustaining America’s aviation leadership.

We opened the dialogue on finding a better finance mechanism for the future last April. Many of you have been part of those discussions. And some very good, and very creative, ideas have emerged.

We are in the final stages of shaping those ideas into what I believe will be a solid, forward-looking financing proposal that allocates the burden fairly, while ensuring that we are poised to finance the Next Generation system.

I cannot give you the details yet, but I expect that we are going to see a cost-based plan that creates a more direct relationship between revenue collected and services provided, which will ultimately make it more responsive to the users.

And we must be realistic about the Federal deficit.

That is one reason that I feel so strongly about making sure that we come up a stable and predictable source of revenue. It is our ticket for opening up new financing opportunities – such as taking advantage of capital markets – to fund our investments in the towers, technology, and other equipment needed to keep pace with the growing numbers of passengers that our airports and airlines are seeing every day.

Fixing the FAA’s financing, negotiating a new labor agreement, and modernizing the system through NextGen and other investments – it is a full agenda. But then, I learned being around flyers that you cannot remain aloft by staying still.

And, Ladies and Gentlemen, our work on these plans will help American aviation do more than remain aloft. It will allow you – the bold thinkers who have built and continue to lead this dynamic industry –to lift it to even greater heights in this new century.

Thank you for keeping America on the move. May God bless you all, and may God continue to bless the United States of America.



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