previously reported, Cessna's Jack Pelton is leveraging the power
of his position at the helm of one of the aerospace industry's most
powerful companies to speak out against errant and short-sighted
attempts by certain Washington and airline elements to change the
funding paradigm for the FAA -- to the detriment of the rest of the
The full speech is an important one... hence our inclusion
of the full text of Pelton's remarks that we're privileged to
offer you below -- read it carefully... the man made a
helluva case for us all.
Good one, Jack. -- Jim Campbell, ANN E-I-C
A Business View of the Myths and Realities Around FAA Funding
Delivered by Jack Pelton
Chairman, President and Chief Executive Officer, Cessna Aircraft
Good afternoon. And thank you for inviting me to join you
It is always a pleasure to talk with people who understand how
vital aviation is to the national interest, and I appreciate your
Over the next 20 minutes, I will be wearing two hats. I am going
to begin as Cessna's Chairman, President, and CEO, and finish as
the Chairman of the General Aviation Manufacturers Association.
So let us start with Cessna. Our company's founder, Clyde
Cessna, was inspired to start his own aviation business when he saw
an air show a few years after the Wright Brothers' first flight.
Clyde was so enthusiastic about the promise of aviation that he
built his own airplane.
He survived 11 crashes as he taught himself how to fly. But he
would not quit, and eventually, he succeeded. And then he built
upon each successive triumph. Clyde's Midwestern stubborn streak
became the cornerstone for the company that bears his name: Cessna,
the brand synonymous with aviation for almost 80 years.
We have helped pioneer developments in aircraft technologies
that have taken us from radial to piston engines and have blasted
us into the jet age.
contribution to these advances has helped us earn our reputation as
the world's leading general aviation company.
Our reputation for leadership is further reflected in two key
facts: first, more than half the people in the United States who
know how to fly learned in a Cessna.
And second - half of all the general aviation airplanes in the
world today are Cessnas.
Our company has not only built - but also is committed to
sustaining - a legacy of aviation leadership.
Two of my predecessors were instrumental in advancing our
reputation and legacy - Dwane Wallace and Russ Meyer. They set high
standards that I am committed to living up to as the company's
fourth Chairman. As I humbly continue the traditions of those who
led Cessna before me, I am faced with a central challenge: How to
inspire this great company, a proven leader that has met every
challenge, and keep it vibrant and forward-looking - the leader in
And although I am a businessman and not a policymaker, the
challenges we face at Cessna seem similar to the ones many of you
in this room are addressing - to preserve aviation's as the
industry heads into its second century.
Consider these parallels: First, I mentioned Cessna's strong
legacy. Similarly, U.S. aviation has a proud history of global
leadership. Our system handles 50 percent of the world's commercial
air traffic and has the best safety record in the world.
Second, I mentioned the need for Cessna to prepare for future
challenges. In the same vein, the work now beginning on FAA
reauthorization must focus on preparing the nation's air
transportation system to serve us well into the future.
As I said, I am a businessman, not a policymaker. But since our
challenges have much in common, and since FAA officials often speak
of the need to run the aviation system more like a business, I am
going to offer another approach.
The same kinds of questions I ask at Cessna are those we need to
ask about future needs and funding for the FAA.
"Where does our aviation system stand today?
"Where is the market headed?
"What are the requirements we will have to meet?"
Instead of answers to these basic questions, all we're hearing
right now are unsupported statements that amount to little more
Unfortunately, these myths have crept into the public discussion
about FAA funding and they have gained undeserved credibility.
My goal today is to debunk these myths and replace them with
some business realities that need to influence the public
To do that, I am going to examine five myths about FAA
reauthorization, and then I am going to outline the business
principles that can guide us to real, results-oriented funding
solutions for the future of the aviation system.
one: The mechanisms for funding the FAA are broken
Some who support changes in the FAA's funding mechanisms contend
that the Agency lacks a stable and predictable funding stream.
As a businessperson, I think we have to look at history, and ask
a simple question: Has the FAA's funding been stable and are its
revenue levels predictable?
The answer to the first part of the question is yes; historical
funding for the FAA has always been stable and predictable.
The truth is, the steadiness of the FAA's funding stream over
the past decade has been nothing short of remarkable.
At no point in the last 10 years has FAA funding declined.
Tech bubbles have burst, terrorists have attacked, wars have
been fought, general aviation deliveries have dropped - I could go
It has been a very turbulent decade. Yet through it all,
Congress has ensured that FAA funding levels remained stable or
Some counter this view by saying funding stability will not be
the case going forward as they point to the President's proposed
budget, which spells out cuts for FAA funding.
I say actions - history - speak louder than words: Just look at
Presidents of both parties have routinely proposed cuts to FAA
funding over the years.
Yet Congress has consistently preserved, and even increased FAA
funding levels. Just last year, the House of Representatives passed
a Transportation Appropriations bill that raised the FAA General
Fund contribution to 25 percent of the Agency's total funding.
That more than doubled the President's budget request! And this
was done without any significant lobbying effort.
So, the reality is the current funding system is not
Of course, now that this reality is being rediscovered, some
supporters are admitting there really is not a funding crisis and
are attempting to reframe the debate by suggesting other reasons
for a change in the FAA's funding mechanisms.
two: A funding overhaul is needed to pay for
modernization, and to cover revenue shortfalls from the declining
commercial ticket tax
You probably noticed that this myth is actually two arguments
bundled together, so let me dissect them one at a time.
The first is that a funding overhaul is needed so the FAA can
invest in technology-based capacity improvements to modernize the
Let me shine a business light on this logic and ask how would a
business evaluate future capital investment needs?
We would conduct studies to determine where the markets are
going, what are the must-haves, what are the nice-to-haves, and so
forth to meet those challenges.
Once we had finished sizing the needs - only then would we
consider the best ways to provide the funding.
What expenditures can be reduced?
What new revenue sources can we tap or develop?
In the FAA funding discussion, it appears these questions either
do not matter - or do not matter enough.
As of now, the only answers we're hearing are:
"We do not know what the cost of modernization will be."
"We are not even sure which technologies are most needed, or
when they would be certified."
"We do not know if a change to the Agency's funding level is
truly necessary for modernization investments."
At Cessna, I would have a tough time getting funding to develop
a new airplane if I could not lay out what we wanted to build, why;
what it would cost; and how long it would take.
The second argument says the FAA funding mechanism needs to be
changed to cover the declines in the airline ticket tax.
From a business perspective, this suffers from the same reality
problem. The fact is, ticket prices, and the taxes that come with
them, are going up. They have been going up for more than a
At the same time, passenger traffic is also up.
Besides, if there is a problem with airline ticket taxes, let's
target the solution to that problem.
We do not need to discard proven revenue generators like the
general aviation fuel taxes or the cargo waybill. These taxes
actually reflect reality and do a great job of approximating system
I would argue that general aviation should continue to pay for
the costs it imposes on the system through fuel taxes. They have
proven to be highly efficient and effective.
You see, for general aviation operators, there is no
administrative burden with the fuel tax. It is simply paid at the
This is important to the thousands of U.S. companies that are
not in the aviation business - but rely on general aviation to help
their organizations compete in the marketplace.
Fuel taxes are also good government policy, because they are
remitted directly from users to the government. Therefore, the FAA
incurs no administrative costs associated with the taxes.
The fuel tax is in stark contrast to the costly and burdensome
bureaucracy that goes with the user-fee systems in other
If the commercial ticket tax is truly a problem, fix that
specific problem. Do not create another one.
Do not replace a simple, fair, and efficient tax on general
aviation with complex user fees.
three: General aviation does not pay its "fair share" for
its use of the National Air Transportation System
The Air Transport Association is fond of saying that while
general aviation represents approximately 30 percent of IFR
operations, it contributes a smaller percentage of revenue to the
FAA's Aviation Trust Fund.
No matter how carefully you listen, you will never hear them
using the most meaningful metric in this entire debate: that
general aviation represents only about 3 percent of all operations
at our nation's 20 busiest and costliest airports.
The reality is the size, complexity and cost of our nation's air
transportation system is dictated by the operating models of just a
Let's face it, the national aviation system was built with one
major priority in mind: to accommodate airline operations - in
particular, to accommodate peak traffic at commercial airline
The principal drivers of the costs of the system are the
infrastructure and support networks to handle those operations at
Don't just take my word for it.
The Government Accountability Office produced a report that
overwhelmingly supported the economic fact that the primary cost
drivers of the system are the airlines' peak operations at the
By contrast, general aviation is simply not a significant cost
driver for the FAA.
Case in point: Ronald Reagan Washington National Airport has
been closed to general aviation for four years. Yet the FAA's costs
associated with that airport have not gone down.
Now, in my roles with both Cessna and GAMA, I care about fair
So I say - General Aviation should not pay for the costs the
airlines impose on the system by putting dozens of airplanes into a
single airport within a 15 minute window. Nor should it pay for any
other expenses driven by commercial aviation - from which we in
General Aviation do not derive a clear benefit.
four: User fees will provide stable and predictable
funding for the FAA
The reality? The track record of aviation user-fee systems, like
NAVCANADA and NATS in Europe, tells us that the mechanism becomes
very unstable in economic downturns.
As a result, government bailouts are required, or fees must be
increased just when the industry is least able to afford the spike
Does this sound like a system we would value in the United
States? One that could be crippled by a new bureaucracy that could
all too easily cost more than it could contribute?
I don't think so.
Myth number five: the Very Light Jet is going
to place a new and undue burden on the air transportation
So let me put the dire predictions about VLJs in
First, these aircraft will be capable of flying efficiently both
above and below airline traffic.
Second, just like today's general aviation operations, VLJ
operations will largely circumvent the large hubs used by the
airlines - and instead operate from smaller airports with runways
as short as 3,000 feet.
Third, even if the most optimistic predictions about the VLJ
market turn out to be true, we will not see large numbers entering
the system over the next five years. That means we have time to see
how this market truly develops.
Now that I have discussed the myths that, to date, have been
clouding the public debate about FAA reauthorization, I would like
to propose a platform for strengthening our aviation system.
This is the platform that general aviation supports.
First, invest in the
National Air Transportation System. Every American benefits from
this system. So a higher contribution- at least 30 percent- to the
FAA from the "General Fund" is appropriate to support the Next
Generation Air Transportation System.
In fact, I would like to invite the airlines to join us in a
concerted effort to secure this level of funding from Congress.
Second, modernize with satellite and other technologies to
We in general aviation want a system that is more
satellite-based than today's ground-based navigation system. The
general aviation sector has proven its willingness over the years
to bear the costs associated with many improvements we all
But the FAA must do the critical work of making the case for
which technologies are needed, and what they will cost.
Third, keep the current revenue structure, including general
aviation fuel taxes.
For the very same reasons I have outlined, the Report of the
National Civil Aviation Review Commission endorsed general aviation
fuel taxes as, "the most appropriate way for this important segment
of civil aviation to pay its share of system costs."
Fourth, reject user fees for general aviation.
And, last but not least…Ensure continuing congressional
Congress's continuing support for stable or increased FAA
funding shows how important it is that the legislative branch
retain its funding oversight role and its ability to serve as a
check-and-balance to the wishes of the Executive.
I am confident that by working together on this platform we can
help affect policy decisions that are more enlightened, more
realistic, more equitable, and more cost effective.
And I am confident that these policy decisions will result in a
goal we all want to achieve - a strong, sustainable aviation system
for our nation.