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Tue, Jan 31, 2006

ATA's Prez, James May, Continues To Advocate User Fees

May Speaks to NAA: '2007 Reauthorization: It’s Time for a Change'

ANN Analysis: ATA Boss James May hasn't been shy about his serving as messenger for the airline industry's desire to see the rest of aviation pay user fees, but a recent speech spells it out even more stridently... and makes it clear to segments of the aviation world that are being asked to pay more of the burden, that the airline industry (which wants to pay less), WANTS IT THAT WAY.

To many, May (pictured lower right) seems more and more willing to split the aviation world down the middle when the business really seems to need to offer a single united front to the world. This allegedly 'penny-wise and pound-foolish' approach is already drawing rumblings among GA and Biz-Av adherents that boycotts of those airlines that espouse such allegedly narrow-minded positions may be in the wind.

This is the complete text of the speech (as provided by ATA) that May gave to the National Aeronautic Association, in Washington, DC, on January 27, 2006. Let us know what you think of his positions and sentiments...

May's NAA Speech

Good afternoon. It’s good to be here. With all of the problems facing the airline industry, I’m delighted to visit with true aviation enthusiasts who appreciate its allure and value – its unparalleled record of individual, commercial and military successes. I don’t need to tell you how our culture and quality of life have been enhanced by, what NAA so aptly describes as, the “art, sport and science of aviation and space flight.” As the nation’s oldest aviation association, NAA plays a unique role of bringing together diverse segments of the industry. From daredevil flyers to air-sports enthusiasts to corporations, NAA preserves tradition by honoring those who have significantly advanced aviation, recording unmatched aviation and space flight accomplishments and facilitating the industry’s growth.

I’m proud to say that ATA has been a member of NAA for decades. I am equally proud to recognize Jack Cole, NAA president in 1994-1996, who currently serves as ATA’s executive planner and liaison for JPDO, FAA’s Joint Planning and Development Office. Every day Jack teaches me a little more about how the industry works – and helps us find ways to fix it when it doesn’t. Jack’s work with JPDO has been tireless. He, along with many of you in this room, is molding a strategy for addressing unsurpassed demands on air space in the next few years. A tough job – we owe you our thanks and support.   

This brings me to a dilemma that we’ve all thought a good bit about lately: Will our air transportation system be able to handle what’s coming? No. Will the current infrastructure – designed and, in many respects, implemented in the 1950s – be able to accommodate commercial air-service demand along with the onslaught of business jets, micro jets or SUVs with wings, pilot-less vehicles and regional jets in the next few years? No again. And it really is time for a change. Our goal is not to exclude, but rather to create a system that includes all users.

Now, rather than launch into a lofty “inside the beltway” discussion on concepts and, frankly, wishful thinking, let’s spend a few moments cutting to the chase about what we can do about future demands on the system. To use Sgt. Joe Friday’s Dragnet approach:  “Just the facts, ma’am.” 

There are lots of opinions about how to solve the “too many planes for too little space” dilemma, but few disagree on the following basics – not even the pragmatic Sgt. Friday.

Fact number one:  People love to fly. And for many of you, that may mean sitting at the controls of your own airplane, or soaring overhead in a balloon. And while business travelers may dread that fifth trip to Los Angeles in two months, they still would much rather get there by plane. We all want to attend our grandson’s graduation or enjoy that fishing trip to Alaska or weekend football game like the upcoming Superbowl – particularly when fares are so low. Contrary to those who say carriers are hiking fares, domestic fares in 2005 averaged 19 percent below 2000 levels while inflation rose 13 percent during that same period. It’s hard to say fares are moving up when you can fly from coast to coast for $139 round trip. You sure couldn’t drive for that amount – yet the public fully expects these rock-bottom air fares to continue.  

As people fly more and more and as businesses ship more and more, the demands on air traffic management continue to grow, faster than ever. From 1970 to 2004, the annual number of U.S. airline passengers quadrupled to 700 million. But when it comes to air traffic control, commercial airlines are only part of the picture. During that same period, FAA workload increased from 23,000 flights per day to 44,000.  Looking out 10 years, FAA projects 57,000 flights per day, and that’s before factoring in the potential for an additional 20,000 VLJ flights. So whether you talk people or planes…demand is skyrocketing.

Fact number two:  We have the safest, most reliable air traffic management system in the world. That said, what’s in place today won’t last forever. Although the existing infrastructure works in picture-perfect conditions, even minor detractions have devastating ripple effects throughout the entire system. One reason the system works today is that commercial airlines know the system and its pressure points, and develop workarounds – like schedule adjustments – to keep the system moving. Even so, massive flight delays and rescheduling threaten the system’s integrity, let alone its efficiency. Today’s infrastructure is stretched to the limit – it just can’t accommodate the surge in traffic expected in the very near future. We are at the proverbial “fork in the road.” We either make fundamental changes or accept an inferior air traffic management system that doesn’t deliver what we all need. You know, Yogi Berra once said, “When you come to a fork in the road – take it!”  Unfortunately, we don’t have that luxury.

In large part, today’s system is dependent on voice communications between aircraft and controllers, enhanced by ground-based radar surveillance and navigational aids. Radar, developed in the 1940s for defense purposes and refined continuously, is the primary way aircraft are located and tracked. While it is true that system components have improved over the past 60 years, it is hard to believe that we still rely on technology – while incredibly safe and proven – that forces aircraft to fly inefficient, less direct routes, with significant separation requirements. That means more fuel and emissions, wasted time and money for everyone – the FAA, the military, business travelers, weekend flyers and the public.  We’re all paying the price.

To meet the challenge, FAA constantly fights an uphill battle. It must fully utilize existing technologies while investing in next-generation technologies, including satellite-based navigation. FAA is working to increase productivity while rationalizing an increasingly costly workforce. And finally, they are implementing an effective cost-accounting system that demands fiscal discipline while continuing to operate the safest air transportation system in the world.

Further, change will not happen overnight. Modifying technologies in a $30 billion national infrastructure takes time, just like modifying technologies in the large fleet of aircraft in operation today. And as you all know, changing technologies alone won’t fully resolve system constraints.

FAA and the industry must design and implement fundamental changes to pilot and controller procedures that the new technologies are designed to support.  Although the concepts of this newly integrated design system are in place, experts are working hard to determine how they will actually work. Again, that takes time, a lot of it, as well as money, tenacity and ingenuity.            

Fact number three:  FAA’s funding structure is obsolete and unpredictable, and just doesn’t make sense. FAA is forced to use more of its funds to pay for ongoing operations than to explore and implement new technologies. Those who say the status quo is working just fine are ignoring the facts, pure and simple. The constant struggle between funding FAA through General Fund appropriations or through the Airport and Airway Trust Fund is taking its toll. It’s hard to plan for operational and technological modernization when you don’t know how much money you’ll have from one year to the next, and you don’t know how large chunks of that money will be earmarked. That’s not FAA’s fault – that’s how the current funding structure works, or should I say, doesn’t work.  

For the past 15 years, the portion of FAA operating costs coming from the General Fund has declined, accounting for only 20 percent in FY 2005. With current strains on the budget from hurricane relief efforts and the wars in Iraq and Afghanistan, and efforts to reduce a projected $337 billion federal deficit, there’s every reason to believe that, despite our best efforts and intentions, FAA will not get the General Fund contribution it requires – meaning that FAA will be forced to rely even more on trust fund revenues.  

To be blunt, because of other congressional and administration priorities, the trust fund is running out of money. From FY 2001 to FY 2004, the uncommitted balance dropped from $7.3 billion to $2.4 billion. The administration predicts that by FY 2006, it will drop to approximately $1.2 billion, the lowest in its history. Now FAA tells us that its expenses will exceed its anticipated revenue in 2006. In response, Congress, the FAA and the administration will be forced to make some very tough decisions – decisions that will directly impact the future of our economy, our country and those of us in this room today.

We have a dilemma that we need to solve. The most direct and potentially most successful line of attack is to figure out a way to ensure that FAA has the resources and the will to get the job done.

The good news is that the FAA knows it and has taken the point in providing leadership. The administrator is working hard to reform FAA, trying to accelerate the transition from a ground-based to a satellite-based system, improve air-traffic control performance, eliminate inefficiencies and management layers, leverage communications technologies and streamline overall operations – and ultimately to involve the system users in mapping a course for the future. It’s not easy and it won’t be done overnight. But, with the administrator, ATO’s Russ Chew, and many others at FAA and within the industry focused on this mission, real progress is in sight.

Next, let’s consider how to best and most fairly fund FAA’s efforts. I’m talking about how to reallocate the trust fund contributions because, as I mentioned earlier, we can’t count on General Fund contributions, even though we all know a vibrant air traffic management system is vital to everyone – not just those who operate airplanes. Clearly, the current trust-fund funding structure – a maze of taxes and fees put in place decades ago when commercial airlines and the military were the only significant users of the air traffic control system – is neither fair nor sensible. According to FAA, commercial airlines, including passenger, freight and charter operations, contributed more than 90 percent of the total user taxes in FY 2004. Yet their total operations made up only about two-thirds of flights under FAA control in the en route system. That means that commercial airlines and their customers subsidized other users of the system by about $3 billion last year alone. You can slice this any way you want and you wind up at the same place:  Some users of the system are not paying their fair share of the costs and that’s making matters difficult for all of us. 

The status quo is not working. The trust fund balance is dangerously low and predictions for beefing it up are dim, at best. I know that some so-called experts are suggesting that because more people will be flying, revenue from the excise tax will be sufficient to cover FAA’s costs. I disagree – so do the FAA and OMB. Even though fares may increase, FAA’s costs will far outpace anticipated revenues. That means revenue from the excise tax is simply not the panacea some say it is. It’s equally silly to say, as other experts have stated, that there is no evidence to justify radical changes in the aviation tax-and-fee system. It flies in the face of what the current and past FAA administrators, presidential commissions and well-respected economists have been saying for years – there must be a better, more stable, transparent way to fund FAA’s efforts – one that imposes costs based on system use, rather than completely unrelated factors such as ticket cost and fuel consumption.

I believe that there is a straightforward funding mechanism that accomplishes just what is needed - imposes a fee on users for services they use and FAA’s cost to provide those services. We must establish a fair, equitable and simple cost-based system for establishing national air space system funding. The funding should be based on proportional use and, ultimately, fund systems that provide incentives for efficient use of scarce resources. Simple. That means an aircraft operator’s use of air traffic control resources determines the amount owed to the FAA, whether the aircraft is carrying three or thirty or three-hundred passengers. Providing an assured and reliable revenue stream also will increase financing flexibility.

Before you decide that my user-fee proposal is an assault on general aviation, remember that, in my view, this should not apply to recreational general aviation pilots operating out of uncontrolled airports under visual flight rule conditions. They should be essentially exempt, paying only aviation gasoline or some equivalent tax. Piston general aviation users generally do not utilize the same air-traffic resources as the airlines, so they are not significant cost drivers. It’s a “pay for what you use” system that allocates costs fairly among system users. 

And, finally, before you accuse me of ignoring the broad benefits of a strong air traffic control system and related FAA functions to society and to the economy, let me assure you that I understand that some FAA services and programs should not be funded exclusively by system users. It is up to Congress to decide what falls into that category and fund those efforts appropriately, including with the General Fund. But whether we like it or not, it is quite likely that most of FAA’s work necessarily will be funded by sources other than the General Fund.

So, where does this leave us? First, we must quit kidding ourselves into thinking that the current air traffic control system – rapidly nearing gridlock with a distorted, insufficient and unstable funding base – will, in the next few years, somehow morph into one that meets the needs of GA pilots, business jets, the military and airlines. Second, we must accept that limits on the current system will prevent it from ramping up to meet the volume and unbelievable diversity of future demands. Third, we must realize that in order to develop and implement a workable plan, FAA must get its house in order and we must agree on a fair way to pay for FAA’s efforts. That’s the only way we’re going to get what we all agree we need.  

We all know that the U.S. economy cannot afford an air traffic management system that fails to meet the needs of users. Period. If we are to continue to lead the world in business ingenuity and opportunities, we have to figure out how to accommodate huge increases in air traffic – or growing congestion, flight delays and general frustration will shut the system down, figuratively if not literally. If U.S. industry is going to continue to compete in an increasingly sophisticated international marketplace, then businesses, consumers, airports, airlines and the public must be able to depend on air-traffic services to get them and their products where they want to go when they want to get there.

It involves change. It is an exercise in hard choices. And it’s time!

FMI: www.airlines.org, What do You Think Of May's Insistence On The Need For User Fees?

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