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PLEASE NOTE: The following transcript is a portion of the official hearing record of the Committee on Transportation and Infrastructure. Additional material pertinent to this transcript may be found on the web site of the Committee at [http://www.house.gov/transportation]. Complete hearing records are available for review at the Committee offices and also may be purchased at the U.S. Government Printing Office.






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MARCH 12, 18, 19, AND 25, 1998

Printed for the use of the

Committee on Transportation and Infrastructure




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MARCH 12, 18, 19, AND 25, 1998

Printed for the use of the

Committee on Transportation and Infrastructure


BUD SHUSTER, Pennsylvania, Chairman

THOMAS E. PETRI, Wisconsin
HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
JAY KIM, California
STEPHEN HORN, California
BOB FRANKS, New Jersey
JOHN L. MICA, Florida
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SUE W. KELLY, New York
RAY LaHOOD, Illinois
FRANK RIGGS, California
CHARLES F. BASS, New Hampshire
JACK METCALF, Washington
ROY BLUNT, Missouri
JOSEPH R. PITTS, Pennsylvania
JOHN R. THUNE, South Dakota
CHARLES W. ''CHIP'' PICKERING, Jr., Mississippi
JON D. FOX, Pennsylvania
J.C. WATTS, Jr., Oklahoma
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NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
ROBERT E. WISE, Jr., West Virginia
BOB CLEMENT, Tennessee
ELEANOR HOLMES NORTON, District of Columbia
PAT DANNER, Missouri
JAMES E. CLYBURN, South Carolina
BOB FILNER, California
FRANK MASCARA, Pennsylvania
GENE TAYLOR, Mississippi
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BILL PASCRELL, Jr., New Jersey
JAY W. JOHNSON, Wisconsin
JAMES P. McGOVERN, Massachusetts
TIM HOLDEN, Pennsylvania

Subcommittee on Aviation

JOHN J. DUNCAN, Jr., Tennessee, Chairman

ROY BLUNT, Missouri Vice Chairman
RAY LaHOOD, Illinois
CHARLES F. BASS, New Hampshire
JACK METCALF, Washington
JOSEPH R. PITTS, Pennsylvania
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CHARLES W. ''CHIP'' PICKERING, Jr., Mississippi
JON D. FOX, Pennsylvania
J.C. WATTS, Jr., Oklahoma
BUD SHUSTER, Pennsylvania
  (Ex Officio)

NICK J. RAHALL II, West Virginia
PAT DANNER, Missouri
JAMES E. CLYBURN, South Carolina
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  (Ex Officio)




Proceeding of:

March 12, 1998

March 18, 1998

March 19, 1998

March 25, 1998

MARCH 12, 1998
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    Barclay, Charles M., President, American Association of Airport Executives

    Fegan, Jeffrey P., Executive Director of Dallas/Fort Worth International Airport

    Merlis, Edward A., Senior Vice President, Government Affairs, Air Transport Association of America

    Plavin, David Z., President, Airport Council International-North America


    Brown, Hon. Corrine, of Florida

    Costello, Hon. Jerry F., of Illinois

    Traficant, Hon. James A., of Ohio


    Barclay, Charles M

    Fegan, Jeffrey P
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    Merlis, Edward A

    Plavin, David Z


    Plavin, David Z., President, Airport Council International-North America, response to questions from Rep. Lipinski

MARCH 18, 1998

    Boyer, Phil, President, Aircraft Owners and Pilots Association Legislative Action

    Dunham, Gail A., President, National Air Disaster Alliance and Foundation

    Fanfalone, Michael D., President, Professional Airways Systems Specialists

    Garvey, Hon. Jane F., Administrator, Federal Aviation Administration

    McNally, Michael P., President, National Air Traffic Controllers Association

    Mineta, Hon. Norman Y., Chair, National Civil Aviation Review Commission
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    Brown, Hon. Corrine, of Florida

    Costello, Hon. Jerry F., of Illinois



    Boyer, Phil

    Dunham, Gail A
    Fanfalone, Michael D

    Garvey, Hon. Jane F

    McNally, Michael P

    Mineta, Hon. Norman Y


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    Fanfalone , Michael D., Professional Airways Systems Specialists, , PASS National President, letter, March 23, 1998

Garvey, Hon. Jane F., Administrator, Federal Aviation Administration:

Response to a question from Rep. Traficant concerning ultraviolet guidance systems

Response to a question from Rep. Johnson concerning the timeline for selection of the site for the Engineering Center of Excellence


O'Mara, Tom, MBA, Board Member, National Air Disaster Alliance/Foundation, letter to Chairman Shuster concerning aviation legislation, March 12, 1998, and a letter from Jim Hall, Chairman, National Transportation Safety Board, January 21, 1998

MARCH 19, 1998

    Barclay, Charles M., President, American Association of Airport Executives

    Clark, John, Vice President, Aviation, Jacksonville Port Authority

    Dillingham, Gerald L., Associate Director, Transportation Issues,
Resources, Community, and Economic Development Division, U.S. General Accounting Office, accompanied by Paul Aussendorf, Senior Analyst
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    Foote, Stephanie, Chief of Staff to Mayor Webb, Wellington City and County of Colorado

    Griggs, Leonard L., Jr., Director of Airports, St. Louis, MO

    Kunkel, Robert W., Director, Wisconsin Bureau of Aeronautics, and Chairman, National Association of State Aviation Officials

    Price, Ronald, P.E., President, Airport Consultants Council

    Tillotson, F. Lee, Senior Director of Planning, Greater Orlando Aviation Authority

    Wigington, Robert R., Executive Vice President, Airports Council International-North America


    Brown, Hon. Corrine, of Florida

    Costello, Hon. Jerry F., of Illinois

    Lipinski, Hon. William O., of Illinois

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    Clark, John

    Dillingham, Gerald L

    Foote, Stephanie

    Griggs, Leonard L

    Kunkel, Robert W

    Price, Ronald

    Tillotson, F. Lee

    Wigington, Robert R




Dillingham, Gerald L., Associate Director, Transportation Issues, Resources, Community, and Economic Development Division, U.S. General Accounting Office:
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All National System Airports, chart

Large and Medium Hub Airports, chart

Small Hub, Nonhub, Other Commercial Service, and General Aviation Airports, chart

Letter to Rep. Blunt, April 29, 1998

Tillotson, F. Lee, Senior Director of Planning, Greater Orlando Aviation Authority, charts:

Capital Improvement Plan, Orlando International Airport, 1998–2002

Capital Improvement Plan, Project Funding Plan, Orlando International Airport, 1998–2002

Passenger Traffic at Orlando will Exceed 30 Million by the Year 2000

Attraction Attendance in Central Florida will Exceed 60 Million per year by the Year 2000

Orlando is the Fastest Growing Major Airport in the World, calendar year 1996

Growth Rates of the Top 30 Airports, January-September 1997

Orlando Leads the U.S. in Population Growth, period 1996–2000

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Wigington, Robert R., Executive Vice President, Airports Council International-North America, and Charles M. Barclay, President, American Association of Airport Executives, charts:

Total U.S. Airport Economic Related Activity Forecast 1998–2008

Total U.S. Airport Related Employment Forecast 1998–2008

1997 Economic Impact of U.S. Airports

U.S. Scheduled Passenger Enplanements

ACI–NA/AAAE U.S. Airport Capital Development Needs, 1997–2002

ACI–NA/AAAE 1996 U.S. Airport Capital Needs Survey AIP Eligibility by Airport Location, Capital Projects 1997–2002

MARCH 25, 1998

    Babbitt, Capt. J. Randolph, President, Air Line Pilots Association, International

    Bolen, Edward M., President, General Aviation Manufacturers Association

    Davidson, David L., Executive Vice President, Barge, Waggoner, Sumner & Cannon, Inc., on behalf of the American Consulting Engineers Council
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    Drinkard, James, Vice President of HNTB, on behalf of American Road and Transportation Builders Association

    Hudson, Paul S., Executive Director, Aviation Consumer Action Project

    Kane, Betty Ann, Washington Lobbyist, National Organization To Insure a Sound-Controlled Environment

    Merlis, Edward A., Senior Vice President, Government Affairs, Air Transport Association of America

    Pittard, Michael J., Chairman and CEO, Aviation Charter Services, and Man, National Air Transportation Association

    Poole, Robert W., Jr., President, Reason Foundation

    West, Pete, Senior Vice President, Government and Public Affairs, National Business Aviation Association, Inc

    Wytkind, Edward, Executive Director, Transportation Trades Department, AFL–CIO


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    Costello, Hon. Jerry F., of Illinois


    Babbitt, Capt. J. Randolph



    Bolen, Edward M

    Davidson, David L

    Drinkard, James

    Hudson, Paul S

    Kane, Betty Ann
    Merlis, Edward A

    Pittard, Michael J

    Poole, Robert W

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    West, Pete

    Wytkind, Edward


Babbitt, Capt. Randolph, President, Air Line Pilots Association, International:

Small Airport Certification, Chronology of Events as of March 25, 1998

Aviation Safety Reporting System, report, February 18, 1998

National Air Traffic Controllers Association, memo, January 29, 1998 and letter, February 12, 1998

U.S. Department of Agriculture, information sheet

The Port Authority of New York and New Jersey, Lanny Rider, Manager, Aeronautical Services Division, John F. Kennedy International Airport, report, Shooting Gulls to Reduce Strikes with Aircraft at John F. Kennedy International Airport, 1991–1997, by Richard A. Dolbeer, U.S. Department of Agriculture Wildlife Services , National Wildlife Research Center, and Janet L. Bucknall, U.S. Department of Agriculture, Wildlife Services, January 1998

    Poole, Robert W., Jr., response to question from Rep. Cooksey

Wytkind, Edward, Executive Director. Transportation Trades Department, AFL–CIO:
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TTD Affiliates

Priorities for FAA Reauthorization

Turbulence in Air Travel

Aviation Carry-on Baggage Limitations

Enact the Foreign Aircraft Repair Station Act of 1997

Whistleblower Protections: Empowering Workers for Safer Skies

Stopping Abuses in Electronic Monitoring

Mandating a Collision Avoidance System for All Aircraft

Resolving FAA Employee Issues


Air Transport Association, Carol B. Hallett, President and CEO:

Letter, September 16, 1997

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Outline of Proposal

Letter, February 19, 1998

    American Concrete Pavement Association, statement

Garvey, Hon. Jane F., Administrator, Federal Aviation Administration, responses to requests for information from Rep. John J. Duncan, Jr. and Rep. William O. Lipinski:

Distribution of AIP Money, spreadsheet

Allocation of AIP Entitlement and Discretionary Funds by Airport Category, chart

Total Airport Operation at Hub Airports, chart

CY 96 Passenger Boardings for Primary Hub Airports

Primary Airports Fiscal Year 1998 Apportionments

Non-Primary Commercial Service Airports listed by Order of Enplanements

Qualifying Cargo Airports Fiscal Year 1998 Apportionments Showing Site Number

1997 Military Airport Program, chart

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FY 1998 State Apportionment and Insular Areas, chart

Number of Grants Awarded and Total Amounts, chart



AIP Letters of Intent, LOI Approvals by Region/State/City/Location/Year

AIP LOI Summary

PFC Statistics

Airports Arranged by State that have been approved for PFC collection

Large and Medium Hub Airports not Participating in the PFC Program

Funds Non Hub

Pavement Maintenance Projects, Innovative Financing Projects, and response to question concerning Housing

Overflight User Fees Summary as of January 23, 1998

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Letter to Chairman Shuster, March 20, 1998, and chart, Operating and Financial summary for 389 of 467 Airports Reporting During Fiscal year Ended December 31, 1996, chart

    Association of Flight Attendants, Patricia A. Friend, International President, statement

    Federal Aviation Association, Report to Congress on Potential For Use of Land Options in Federally Funded Airport Projects, December 1997

    1996 Airport Financial Reports Brief on Grandfathered Payments

    Letter from Hon. Corrine Brown, Hon. Tillie Fowler, and Hon. Cliff Stearns, Representatives in Congress from Florida, May 11, 1998

    Southwest Airlines, Herb D. Kelleher, Chairman of the Board, President and CEO, letter, June 15, 1998

    National Taxpayers Union, letter, June 22, 1998




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U.S. House of Representatives,

Subcommittee on Aviation,

Committee on Transportation and Infrastructure,

Washington, DC.

    The subcommittee met, pursuant to call, at 9:30 a.m., in Room 2167, Rayburn House Office Building, Hon. John Duncan (chairman of the subcommittee) presiding.

    Mr. DUNCAN. We'll go ahead and call the subcommittee to order. First I want to say good morning and welcome to what I think should be a very interesting review or debate or discussion about the issue of whether or not the Passenger Facility Charge, or PFC, should be increased. As we all know, the PFC is currently capped at $3.00 per passenger per airport. The airport community wants to increase it and the airlines, of course, oppose the increase.

    I know that we will hear very compelling and impressive arguments from the distinguished representatives of both the airlines and the airports this morning.

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    All of our witnesses have provided this subcommittee with outstanding testimony in the past, and we appreciate them being here with us again today.

    The $3.00 Passenger Facility Charge program was authorized in 1990, and was actually implemented in 1992. In the first full year of implementation, more than $85 million was collected. According to the FAA, total U.S. passenger traffic has grown from 506 million in 1992 to 639 million in 1997, and this number is expected or projected to grow to 995 million or right at 1 billion by the year 2008, 10 years from now.

    Airlines have argued in the past that any funding problem in airports can be met by raising airline landing fees and lease payments. It is my understanding that the airlines would agree to such higher payments for important safety, security, or capacity enhancing airport projects.

    The FAA tells us that in 1996, $1.1 billion in PFC funds were collected from some 268 airports and distributed in the following manner: 35 percent went to projects such as runways, taxi-ways and safety related projects; 30 percent for landside projects, primarily terminal buildings; 17 percent to pay interest on bonds; 11 percent for noise abatement projects; and 6 percent for roads.

    The National Civil Aviation Review Commission recently recommended that the $3.00 cap be waived at an airport where ''there is written agreement between an airport and its tenant airlines for the airport to levy a PFC higher than $3.00''—in other words, just a voluntary agreement. I hope that we can learn more about this and other proposals from our witnesses today.
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    Members may recall that during the 1996 reauthorization process, a question arose between the airports and the airlines over how much the airports really needed. At that time, the airports contended that they needed approximately $10 billion each year, their current and future needs, and the airlines believed that the airports needs were actually closer to $4 billion per year.

    In order to help us resolve the discrepancy, the Committee asked the General Accounting Office to examine the competing assessments of airport needs. I think it is fair to say that the needs are somewhere between $6 and $10 billion. The memo for this hearing, provided to the Members last week, includes an excellent summary of the programs which provide federal aid to airports as well as the GAO's findings and the range of airport needs, depending on how those needs were defined.

    We look forward to this morning's testimony which will help the subcommittee in its decisionmaking process as we move forward on this year's reauthorization.

    I now yield to my good friend, the very distinguished Ranking Member of the Subcommittee, Mr. Lipinski.

    Mr. LIPINSKI. I thank you, Mr. Chairman, and I thank you for holding this hearing. You mentioned about the information that was distributed to the Members of the subcommittee pertaining not only to PFC but all the issues pertaining to the AIP, and I thought the material was excellent, really, and the staff did an outstanding job and they ought to be saluted for getting this information out to the Members. If the Members of the Committee read all this information, they will be extremely knowledgeable about the entire situation.
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    I look forward to this hearing very much this morning, as one of the enthusiastic supporters of the PFC back in 1990, along with Jim Oberstar and Sam Skinner and a few other people. I am still a very strong supporter of the PFC. I think that we should pass a $10 PFC and be able to utilize it within 50 miles of any airport in the entire country.

    Now, there may very well be some people present here today and other people in the aviation industry who don't agree with that particular position, and I'll be more than happy to hear from them today, and I will listen with an open mind to their testimony, but in all seriousness I believe that in the very near future, we are going to have to increase the PFC if we are really going to meet the needs of aviation in this nation.

    If we don't increase the PFC, we are going to wind up having to utilize more money out of the Trust Fund, and perhaps—I shudder to think of it—but increase the amount of money going into the Trust Fund, which means either additional taxes or higher user fees. But this is an issue that's confronting us, it's going to be here for a while, and I think we're going to have to address it, but I do sincerely look forward to the testimony we're going to receive today from all our witnesses. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Mr. Lipinski, and I certainly concur in your comments about the briefing memo. In fact, I told Mr. Schaffer I thought it was a really outstanding briefing, and it is a very informative one. I hope all the Members will read this as we proceed through all these hearings that we're having on the reauthorization.

    At this time, I'll call on Ms. Johnson.
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    Ms. JOHNSON. Thank you very much, Mr. Chairman. I appreciate you holding this hearing. I do want to introduce one of the panelists. Is it the appropriate time to do that, or wait?

    Mr. DUNCAN. Yes.

    Ms. JOHNSON. I want this morning to introduce Mr. Jeffrey Fegan, the Executive Director of the Dallas/Fort Worth International Airport. He is the Chief Administrator and Executive Officer of the DFW Airport Board, and recommends policies to the Board for planning, constructing, maintaining, operating and regulating the airport. Prior to this appointment, he served as Deputy Executive Director of Finance Administration.

    Mr. Fegan joined DFW in 1984 as Chief Planner, and was later promoted to Director of Planning and Engineering. He has been in the aviation industry since 1978 serving both in the public and private sectors. Representing the DFW Board, he is a member of the Board of Directors of the Airport Council International-North America, and he is also an accredited airport executive, a member of the American Association of Airport Executives, American Planning Association, and American Institute of Certified Planners.

    As you know, Dallas/Fort Worth Airport is the second busiest airport in the world in terms of operations and the third busiest airport in terms of passengers. The success of that airport can definitely be attributed to this Subcommittee and its leadership.

    The Airport Improvement Program has successfully helped to fund such new implementation as the MATS plan, which is a comprehensive air traffic system which was officially commissioned in October 10, 1996.
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    I am delighted to have him present, and I know that when we hear him, Mr. Chairman, we will understand that while Dallas/Fort Worth Airport now is second busiest, we are on our way to being number one in the world because of where we are located is such a dynamic area and because of the efficiency of that airport. We finish on time, ahead of schedule and within budget every time. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Ms. Johnson. Next we will call on Vice Chairman Blunt.

    Mr. BLUNT. Thank you, Mr. Chairman. I just want to thank you for holding the hearing today and really the leadership you're giving the Committee in the oversight in this whole area of FAA modernization. I look forward to the testimony, and I'm certainly very open on this question, and hope to move further along as we have a chance to get this information today.

    Mr. DUNCAN. Thank you very much. Mr. LaHood.

    Mr. LAHOOD. Thank you, Mr. Chairman. And I too thank you for holding this hearing. This is a very, very important item. When I reviewed what we were going to be doing here today and the impact that the Airport Improvement Fund has had in my home community and also Capital Airport which is also in my district, it's been an extraordinary program. When we talk about transportation infrastructure and ISTEA or BESTEA, we're always talking about building roads and bridges, but there is no better use of our tax dollars and the ability to really continue the progress that has been made at a number of facilities and airports around the country, and that's why this hearing is important.
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    I, for one, favor increasing our ability to continue to provide the infrastructure for these facilities, and I hope at some point we'll move in that direction because this is just absolutely critical. We've made a huge investment in our airports and the runways and the infrastructure around the country, and I hope that we can continue that progress, and I think with your leadership we will do that—the leadership of this Committee, we will do that—and I certainly favor whatever we can do to continue the improvements that have been made and making progress. And thank you for the opportunity to be a part of the deliberations in doing that. Thank you.

    Mr. DUNCAN. Well, thank you very much, and some good points. We'll next—I know Mr. Moran just came in and hasn't really had a chance to catch his breath, I suppose, but I want to welcome him to the Subcommittee. We are starting some hearings on the FAA modernization programs and the Airport Improvement Program and issues pertaining thereto and, as a couple of us have mentioned earlier, Mr. Schaffer and the staff have prepared a very outstanding briefing memo that really contains a lot of information, and if you read that it will bring you right up-to-snuff on some of these programs and issues that we're dealing with not only in this hearing, but the next three hearings that we'll be holding. So, do you have any statement that you wish to make at this time?

    Mr. MORAN. No, Mr. Chairman, thank you. But I will tell you that I am a new enough Member that I've actually read the memo before being here this morning, and I do appreciate my ability to serve on your Subcommittee, look forward to working with you. These are important issues to me and my constituency, and look forward to being an informed and fully participatory Member of this Subcommittee.
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    Mr. DUNCAN. Well, we're certainly glad to have you.

    [The prepared statement of Mr. Costello follows:]

    [Insert here.]

    Mr. DUNCAN.We'll go ahead and start with the witnesses at this time, and we are very honored to have, as I've said, several witnesses who have been with us on several different occasions.

    We have Mr. David Z. Plavin, who is the President of the Airport Council International-North America; Mr. Charles M. Barclay, who is the President of the American Association of Airport Executives; Mr. Edward A. Merlis, who is Senior Vice President for Government Affairs at the Air Transport Association of America, and Mr. Jeffrey P. Fegan, who is the Executive Director of the Dallas/Fort Worth International Airport.

    Gentlemen, we are pleased to have each of you with us. We always proceed in the order listed on the call of the hearing, and that means, Mr. PlAvin, we will start with you, and you may proceed with your testimony.

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    Mr. PLAVIN. Thank you, Mr. Chairman, Members of the Committee. Mr. Barclay and I have prepared some testimony. We would appreciate it being submitted for the record.

    There are a few points I would like to emphasize. First, we are here to talk about PFCs, but PFCs are really part of a larger program. PFCs are one of a series of sources of capital funding on which airports depend for their well being.

    Second each airport is different. Each airport has its own set of funding opportunities and funding requirements.

    Third, PFCs are not just a large airport program. The large airports can use PFCs, perhaps, more effectively than some other tools. But, in the past, the opportunity to use PFCs has meant that additional funds were made available through the Airport Improvement Program (AIP) which, in turn, can be for the benefit of smaller airports. And many small airports do impose PFCs. That's a pattern that we think is important to continue; the combination of funding sources allows each airport to determine its needs and how it will fund them, at the local level.

    Since 1991, PFCs have been used to fund many different kinds of programs. But it's important to point out that we can't look at just PFCs, alone, in examining funding patterns because each airport will negotiate its own with its carriers as to how it will use different combinations of funding sources.

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    These funding sources include not only AIP and PFC, but primarily, in the case of airport investment, airport bonds. Airport bonds, in fact, are significantly larger than those other two sources put together, and we would expect that to continue into the future. PFCs should be viewed simply as one tool among several mechanisms that airports can use.

    Finally it is important, also, to consider the question of what we will be facing as we look to the future. Later this morning, FAA will publish its annual, to hear an official forecast of commercial aviation activity. We expect that that forecast will show that, over the next 10 years, we will see a 50-percent increase in the growth of scheduled aircraft passengers. Those added passengers will represent 330 million enplanements per year. Again, that's a 50- percent increase over what we have now. That is the equivalent of the top 30 airports in the United States. That is also the equivalent of ten airports the size of our colleague, Mr. Fegan's, airport, DFW. And there is no anticipated capacity of that type on the horizon.

    With that being the case, the question then will be, how do we handle that growth in passengers? That growth in passengers will come in the form of larger aircraft which, in turn, will put more demand on terminals, more demand on ticketing, on baggage claim, on airport circulation and access systems. So it's important that we lift the current limitation on PFCs as a tool to allow airports to deal with these kinds of growth and investment issues. That will be even more important when we are trying to encourage new carriers and new competition. We cannot keep up with this type of demand unless we have the opportunity to make better use of funding sources like the PFC that would allow us to respond to that growth in demand and to opportunities from our communities for better air service.

    I appreciate the opportunity to comment before you today, and look forward to answering whatever questions you may have. Thank you.
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    Mr. DUNCAN. Thank you very much.

    Mr. Barclay.

    Mr. BARCLAY. Thank you, Mr. Chairman and Members. It's nice to be here after nearly a decade of seeing nothing but bad news coming out of this industry. It's really a pleasure to be here at a time that we can recognize that the airlines are enjoying record profitability. There are record low fuel prices with record high stock valuations for most of the major airlines, and that is all very welcome news for all of us in the aviation business.

    The record high passenger levels that have come with the terrific economy, however, have a disturbing side to our airport partners in the industry and, in the face of this rising demand and records being set, we're also looking at a picture where in this decade the Federal Government's investment in airport infrastructure, both AIP and PFCs, is down in both real and absolute dollars. We're hoping this year to get AIP back to the level it was at the beginning of the decade, even though there's 100 million more passengers in the system.

    The second point I'd like to make is that the airport-airline disagreement on PFCs is understandable, both parties are playing their roles, and it's largely a disagreement about control as well as a disagreement about levels of fees.

    The committee is being asked to be a referee in this is one of the jobs that you are given and that we have to, in this case, wind up as an industry asking you to choose. And it's not too surprising.
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    Airlines are tenants, airports are landlords. An airline supports airport development that benefits its shareholders, and an airline opposes airport development, or hopes certainly to oppose airport development, which benefits somebody else's shareholders. There's nothing wrong with that. That's the job they've got and that's where their incentives are.

    Airports try to support development that will help the total passenger and user demand at an airport facility, and often in major portions of those projects it's very difficult to decide whose shareholders are going to win and going to lose. It's just clear that the total passenger demand needs those facilities and investments.

    Airlines have a short-term financial view of the world measured in quarters, again driven by their shareholders, and again that's their proper role. Airports, of necessity, have a 5- to 10-year view of the world in terms of finances. As an example, the Phoenix Airport is bringing on a runway next year in 1999 that was begun in 1989, 10 years ago. In the early years of that project, all the airlines opposed it. One of their major tenants was in bankruptcy and, for understandable reasons, wasn't supporting any new investments.

    PFCs collected in Phoenix have all gone into that project, and that is the kind of tool that has allowed them to go through these cycles of business for the industry, and continue that long-term project with the airports long-term financial view.

    So, the different motivations are not surprising. It's our case to the Committee and to the Federal Government that they should choose to keep and promote control of airport development with those that are motivated to look at total passenger and user demand, not individual shareholder demand. That choice also needs to include the financial tools such as PFCs that let us make the investments that are necessary.
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    My final point is also about control, but it's about the difference between Federal and local control. Notwithstanding this Committee's efforts, that we very much appreciate, to free the Aviation and other trust funds, the Federal Government in the '90s, has, with its own resources due to its general budget pressures, reduced the funding that comes out of the Federal budget for airport development. At the same time, the Federal Government has maintained the PFC cap which limits the ability of local governments to solve their own problems on airport capacity where they have the marketability to do so.

    I've had at least one of my members say about this dual role of the Federal Government that he feels like he won the ''double whammy'' award at a Federal Government encounter session, and it is a dual disapproval of the Federal Government in pulling down airport funding at the same time they limit a local government's ability to meet the needs themselves.

    The PFC limit is truly inconsistent with the goal of devolving Federal Government power to local governments where it is reasonable to do that. That cap is also limiting the ability of airports to meet the kind of capacity demands that are out there and are very important to our economy in general, not just important to the aviation system.

    So, Mr. Chairman, our view is that the cap on the PFC should be lifted, and part of that legislation should also link that lifting of the PFC cap, which primarily benefits the larger airports, link to that a shift of airport funding from the AIP program to smaller airports. Thank you.

    Mr. DUNCAN. Thank you very much.
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    Mr. Merlis.

    Mr. MERLIS. Thank you, Mr. Chairman. I appreciate the opportunity to appear before you today to present the views of the Air Transport Association concerning an increase in the Passenger Facility Charge. My written statement goes into some of the history of the Passenger Facility Charge, and I think it's important to note that the airport and airline industry had flourished up until 1992 when it was instituted, and we believe even with $3.00 PFC it will continue to flourish.

    Since the institution of the Passenger Facility Charge, the traveling public has been handed a bill for $18.5 billion—that's the amount the FAA has approved to be collected. In far too many cases, these taxes have been used to support projects that are tangential at best to the true safety and capacity improvements which we believe Congress had in mind when it permitted airports to begin imposing the tax.

    What's gone wrong? Well, we think that some airports learned very quickly how to ''game'' the system. Instead of funding high priority projects that offer meaningful safety and capacity enhancements, the PFC project pile is full of too many marginal, debateable, and just plain wrong proposals. They could never have passed the type of thorough business case analysis that scrubs good projects from bad and forces the setting of appropriate priorities. Thus, in addition to paying $18.5 billion in taxes to fund PFCs, other truly tested and valuable projects have been financed through the traditional process of airport-airline negotiation, where they have indeed moved forward. The bottom line, however, is that the consumer has gotten to pay for them twice.
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    Now we are hearing from the airport community that this addiction to easy tax money is becoming more acute, they need to increase their dosage of PFCs. On behalf of the ATA members, and I dare say in this case. On behalf of our passengers, we think there is only one appropriate answer—just say no.

    It's now more than 35 years since the first head tax was proposed, and to this very day you have repeatedly heard that this revenue stream was essential to the well being of our nation's airport infrastructure. Don't be swayed by the siren song of free money now being sung by the airports to bump up the PFC ceiling. They have sung it before and they will sing it again.

    The 5-year cost of a $2.00 PFC increase is $4 billion. Since the average PFC is imposed for 10 years, a $2.00 PFC in all likelihood means a tax increase of $8 billion. The ATA member carriers are steadfast in their opposition to any increase in this tax, and unified with you and the American people in opposing excessive taxation.

    Mr. Chairman, if you want to do something about the PFC program, we suggest you take a look at the fiscal responsibility void associated with it. Unnecessarily absent from the statute is a precise congressional direction that all PFC projects must have a clear aviation-related need and cost-benefit justification in order to proceed.

    The airports that impose PFCs don't think it's appropriate. The FAA that authorizes imposition doesn't think it's appropriate. It's time for someone in authority to have the will to take this on.
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    We urge you to end the situation. With the FAA having already authorized the collection of $18.5 billion in PFC taxes without any cost-benefit requirement, we respectfully request that the Congress refrain from increasing these taxes and instead instill a measure of accountability in the process.

    We suggest at a minimum that the Subcommittee advance legislation requiring an enhanced regulatory definition of the criteria for justification and approval of PFC projects. There needs to be a burden on both the proponents and the FAA to evaluate proposals against objective standards.

    We are simply asking that a basic and objective analysis be required to determine if a proposed PFC project is needed. Frankly, we believe that the opposition by some elements of the airport community to such a test is suspect. Projects worthy of funding should easily pass such a test.

    Lastly, Mr. Chairman, I want to bring to your attention one additional matter that calls out for congressional attention. The Congress must put a stop to wasteful airport spending on off-airport projects that do nothing to enhance the safety, capacity, or security of the national system of airports.

    FAA's approval last month of approximately $1.5 billion in Passenger Facility Charges to build a train, much of it off-airport, at New York's John F. Kennedy International Airport is a major setback for airport safety and capacity investment. The FAA's approval is all the more alarming in light of the priority given to this train over other Port Authority capital improvements awaiting funding, by the DOT Inspector General's own estimate, $2.4 billion, much of it involving safety, security, and capacity.
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    Less than 10 days after the FAA approved this project, Denver approached the airlines once again to resurrect its plan to use airport funds to acquire an off-airport rail right-of-way. The initial 17-mile stage of this project would connect the airport with downtown Denver. The long-term plan would connect the airport with ski resorts. Is that an appropriate use of airport funds?

    Mr. Chairman, we would like to thank you and the Members of the Committee for the opportunity to present our views on the Passenger Facility Charges and, as you move forward with legislation, we stand ready to work with you on an appropriate cost-benefit needs assessment program and on defining limits on the use of airport funds for airport access projects. Thank you.

    Mr. DUNCAN. Thank you very much, Mr. Merlis.

    Mr. Fegan.

    Mr. FEGAN. Mr. Chairman and Members of the Aviation Subcommittee, I appreciate very much the opportunity to come out today and talk to you all about this important issue, and also appreciate the opportunity to be last on the panel because, while the industry groups represent their constituents very well, tomorrow I go back to DFW Airport and try to figure out how to fund a fairly significant development program to meet the needs of the traveling public.

    Our airport this year will be turning 25 years old. In that short period of time, we've really grown tremendously to being the second busiest airport in the world but, more importantly, we create a tremendous amount of economic impact to the Dallas/Fort Worth region, over $10.8 billion a year in economic impact. Over 204,000 jobs are created either directly or indirectly related to DFW Airport. Last year, we handled over 60 million passengers and 851,000 aircraft operations.
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    I can assure everyone on this Committee that every PFC dollar that we have collected has gone to meeting the needs of the traveling public. Those PFCs have been used primarily for the construction of new runways, taxi-ways, hold pads, terminals, environmental impact statements for runway extensions, hard-core capacity improvements to meet the needs of the traveling public.

    As we look into the future, though, we still see a tremendous need for additional capital. We see tremendous growth on the horizon. Today, for example, we're very much gate- constrained, so we have a $109 million terminal construction project that is partially being funded by PFCs underway.

    As we look at the next 10 years, we do see a number of other projects that are needed. In fact, in our 10-Year Master Plan, we have two more terminals to build—our eight-carrier runway will be built, as well as a very substantial and expansive people-mover system to connect all the terminals within our very large airport. All in all, between now and the year 2015, we may be looking at a development program that will cost somewhere on the order of $4 billion. The question is, how do you finance something of that magnitude?

    First, let me just say that joint revenue bonds we believe will not be sufficient to meet the airport's long-term needs. And we don't believe that the Airport Improvement Program can adequately pay for a lot of the construction projects that we have, but we also feel that we have a need for full utilization of the Passenger Facility Charge.

    Historically, to date, the Federal Government has provided in our 25-year history, $390 million of Federal funds for highly needed or badly needed capacity improvements. And, again, there is seemingly a myth out there that large airports such as DFW Airport do not need any additional financial assistance more than the $3.00 Passenger Facility Charge that we get today. But, in fact, if we don't receive additional access to Passenger Facility Charges, we will find ourselves having to borrow substantially more money today than we have outstanding in terms of our debt. In fact, today we have about a $1 billion in debt. Again, without an increase in PFCs, we will be looking at increasing that by another $2.6 billion.
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    The issue is more than just the cap. We also strongly urge you to consider changing the terminal eligibility requirements under the existing Passenger Facility Charge legislation. Currently, the Passenger Facility Charge legislation applies the AIP definition of terminal development cost to the PFC definition of ''eligible related airport projects for terminal development''. Strict application of the AIP criteria for eligible versus noneligible cost of PFC-funded terminal projects places residual airports at the mercy of its tenant airlines through the majority and interest approval process.

    To give you an example, we have a project today of a new terminal expansion, five new gates, $109 million. About 77 percent of that is PFC-eligible, but the remaining portion is not. Fortunately, this project is one that one of our large tenants wants to build, and they've come up with the additional dollars. However, if we wanted to build the same type of terminal expansion for new tenants or new entrant carriers or expansion of existing tenants, we would have to come up with the remaining 24 percent through bonds or some other airline approval.

    Again, we think that expanding the eligibility of Passenger Facility Charge toward the entire terminal project will go a long way toward enhancing capacity and also increasing competition and allowing for new entrants to enter into an airport.

    In closing, I truly believe that the Passenger Facility Charge is the key if airports are going to meet the future needs of the traveling public. We have, as I indicated earlier, an economic impact of over $10.8 billion. We have also looked at what happens if we build these projects and we see the growth that we are anticipating, and what happens if we don't. That figure could jump up to $18.1 billion by the year 2015. But if we are unable to build these projects, the economic loss is measured at a point of about $32.7 billion over the life of the projects.
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    From an employment perspective, it's even more dramatic. Today we have employment that's related either directly or indirectly to DFW in the amount of 204,000 jobs. That number is expected to grow to 335,000 jobs by the year 2015, if the projects are funded, if the projects are approved. Unfortunately, though, if they are not approved or not funded, that number reduces down to 257,000 jobs, or a reduction of some 77,000 jobs, would not be realized if DFW Airport cannot finance its needed infrastructure to meet the needs of the traveling public.

    So, in closing, I would urge you to give serious consideration to modifying the Passenger Facility Charge and, from it, DFW Airport and other airports around the nation will become the economic engines that they are designed to be. We are at a threshold of experiencing a huge economic expansion, and this expansion can only be fully realized with the help of our transportation partner, the Federal Government.

    So, I thank you very much for the opportunity to speak today, and I'll be more than happy to answer any questions.

    Mr. DUNCAN. Thank you very much, Mr. Fegan.

    We're going to go for the first round of questions to our very outstanding Vice Chairman of the Subcommittee, Mr. Blunt of Missouri.

    Mr. BLUNT. Thank you, Mr. Chairman. Mr. Fegan, on the whole question of eligibility requirements, what kind of eligibility requirements do you think there should be, if you could be brief about that.
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    Mr. FEGAN. I think for airports such as DFW that are residual, that require a majority and interest approval from the other tenants to pay for the ineligible projects, I think projects such as terminal buildings, the entire terminal building should be eligible for PFC funding.

    Things today such as fueling and even the base building for areas that are airline space is not eligible for funding using PFCs. So, in effect, unless I have a majority and interest approval from the airlines, I cannot build new terminal developments at DFW Airport to help support new entrants as well as expansion of existing tenants.

    Mr. BLUNT. But the project you're working on now, 77 percent met the requirements?

    Mr. FEGAN. Seventy-seven percent met the requirements, the other 23 percent was being funded by, in this case, American Airlines who is looking to make the expansion. But if it was for someone else or for a new entrant carrier, that money would have to come through bonds. That money would have to be approved by a majority and interest of the airlines.

    Mr. BLUNT. Unless that new carrier wanted to fund it and could afford it?

    Mr. FEGAN. That's correct, yes. And typically what our experience has been is that as new entrants or smaller carriers try to come into an airport such as DFW Airport, they would like to have the flexibility to try the market, to grow the market before making multi-million dollar investments in terminal buildings at an airport.
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    Mr. BLUNT. Mr. Merlis, I think you believe the eligibility requirements are too broad now, is that right? I think in your submitted testimony, you suggested that there were lots of things spent here that shouldn't be spent.

    Mr. MERLIS. Sir, more so than the eligibility requirements being too broad is the absence of any cost-benefit test. I think leaving the eligibility requirements as they are, though dealing with this off-airport access issue which I think is imperative, would be fine provided there were some cost-benefit test associated with it.

    We have no problem funding a wide array of projects through the PFC. The PFC has served an important purpose. But with approximately, by our count, 25 percent of the projects, or 25 percent of the dollars having been misused, we're talking almost $4 billion of that which has been approved, is a waste of tax collections. So, if a cost-benefit test were associated with it, then both the airport as the proponent and the FAA as the arbiter would be able to say yes, the benefits exceed the cost, therefore, it can go forward.

    Mr. BLUNT. Give me some examples. I know the railroad in New York, you are concerned about that, but do you have other examples of waste in the system? Do you think that the roads coming into the airport, would that be a wasteful use of PFC money?

    Mr. MERLIS. Absolutely not. Access on-airport makes sense and is an important component. Access off-airport is another matter. This Committee has done magnificent work in ISTEA and BESTEA. There are other sources of money. Remember, airport safety is first. Let's invest in safety first. There is no other source of money for safety on an airport.
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    Airport safety and capacity, meaning the runways, terminals, and taxi-ways and the like—those things should have primacy. And on-airport roads, of course, those should be funded out of this program, no question about it.

    Mr. BLUNT. I guess my last question, for whoever wants to deal with it, is, I think the Clinton Administration anticipates that this fund is going to have an $8-9 billion surplus in it by the end of FY99. Why would we want to increase the fee for a fund that has this significant surplus situation? Do you want to start?

    Mr. PLAVIN. Thank you, Mr. Blunt. I think there are two reasons. First, history suggests that, whether or not there is a surplus in the Aviation Trust Fund, the airports don't get to see very much of it. The AIP program was increased last year after several years of continuing declines, even when we had significant surpluses. Last time we had a significant surplus, we allowed the ticket tax that funded the Aviation Trust Fund to expire as a way of drawing down that surplus.

    The second issue is whether, in fact, the AIP program serves airports of the type that Jeff Fegan represents. This also a significant issue. Even if AIP were fully funded at the level that this Committee has authorized time and time again—which, by the way, hasn't happened—that dollar amount doesn't typically go in large amounts to airports the size of DFW which have some of the projects with the greatest dollar value and capacity implications.

    So, for these reasons, in addition to the fact that the PFC is a local funding source, being raised locally, being used for projects where they are raised, and being used for things that are determined by the local communities to serve their local passengers needs, the insufficiency of the Trust Fund, as it is being used, causes us to work strongly for the PFC.
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    Mr. BARCLAY. Mr. Blunt, if I could add, a very important distinction is that Passenger Facility Charges, contrary to Mr. Merlis' description, clearly are not taxes. As opposed to the Federal taxes that do feed the Aviation Trust Fund, that come to Washington, the Federal Government charges them, they are appropriated from the Federal Government—the Passenger Facility Charge can only be raised and is raised locally, can only be spent for the facilities, the fixed facilities, passengers need to get on airplanes.

    So, it is part of the fixed cost of running a business. Whether the passenger paid through a Passenger Facility Charge or through any of the other mechanisms that they are charged with at airports, they have to pay those fixed costs for the facilities if the facilities are going to be there.

    Airlines enjoy—while they have a very challenging business to run, they enjoy a big advantage over other industries. They get their plant risk-free. Most other industries have to build their own plant and take the risk for it, and that plant is there to be paid for whether they are in good times or bad, and they certainly don't get tax-exempt financing as an advantage for their plant.

    The airlines have all those advantages. Airports are built by local governments. They take the risks. They get tax-exempt financing for it so that costs are less for those capital facilities. And a PFC increase is an element that is collected and spent locally. It is collected right from those passengers, stays there locally, can only go for those facilities at that airport, and that is a very efficient way to pay for that kind of plant. So it's completely different from the taxes that are feeding the Aviation Trust Fund.
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    Mr. BLUNT. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you. Ms. Johnson.

    Ms. JOHNSON. Thank you, Mr. Chairman. My major concern is safety, and we keep hearing noises about planes disappearing for so many seconds, and lots of the controllers are complaining about not having the best technological equipment. Is there any focus from airport officials or organizations to plan for improvement in those areas.

    When the National Airport first opened the new terminal, one of the major concerns was that it was a great new terminal with outdated technology. What is the direction and thrust or desire or whatever for the airports around the country? Is all the equipment getting old? Air Force I disappeared this week for 30 seconds, or 36 seconds.

    Mr. PLAVIN. Ms. Johnson, I think you've put your finger on a concern that the airport community has had for some time. If I could separate out your concern into two issues, the first has to do with the air traffic control capabilities. While airports have been an advocate, for a long time, on behalf of sufficient funding for the modernization of the air traffic control system, I think it's also true that this Committee served us all well when, a couple of years back, the Congress enacted changes in the way in which the air traffic control system can procure systems and facilities, and the way it can recruit and manage its personnel. I think that has already made a big impact, although it has a long way to go.

    The second thing, however, is that everyone understands the huge demand that is going to be felt throughout the system. And, I think, the FAA as well as airports consider that there is not enough money today in the system, in the Federal grant programs, to keep up with the needs for modernization of the air traffic control system, as well as for the airports.
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    And going back to the point Mr. Blunt made earlier, the demands of funding the air traffic control system out of the Aviation Trust Fund is one more reason why there are fewer and fewer of those dollars remaining for airports.

    The second thing is that the airports participate, with airlines, with the air traffic control operators, in setting priorities for their airports. And I'm not surprised that Mr. Merlis is unaware of the investments that are being made in airports for safety concerns. But runway improvements, runway extensions, new runways, are indeed direct contributions to the improved capacity and safety of those facilities and, in truth, they are the highest priority and, typically, are the first ones to get funded before the many other concerns that airports address.

    Mr. MERLIS. May I respond?

    Ms. JOHNSON. Yes.

    Mr. MERLIS. Thank you. Of the $18.5 billion in PFC funds which have been approved, $1.03 billion is going to runways, $4.58 billion is going to terminals, quite a disparity between terminals and runways, one of which has safety implications the other doesn't. Now, if you add runways, taxi-ways, aprons, equipment, air side planning, lighting and the like, you get to $2.8 billion, still only 18 percent of the total PFC approvals to date have gone for issues which I would say are primarily safety-related.

    Ms. JOHNSON. Thank you very much.

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    Mr. DUNCAN. Thank you, Ms. Johnson. Dr. Ehlers?

    Mr. EHLERS. No questions at this time, Mr. Chairman. Thank you.

    Mr. DUNCAN. Thank you very much. Mr. DeFazio?

    Mr. DEFAZIO. Thank you, Mr. Chairman. I'm sorry, I had to run to another hearing. They thought they needed me, but they didn't. I guess I'd like to—and I understand that a question has been asked on airport issues, but I'd like to perhaps address that a bit more given the tone of the ATA testimony.

    You know, I was one of the authors of the original PFC bill, and I didn't feel that it was totally restricted to safety issues and, in dealing with capacity issues, we dealt with movement of people in and around an airport property. And I guess someone has already raised the issue of construction of a roadway within airport property, and I understand that Mr. Merlis said that that would be acceptable but I guess not their highest priority, is that correct?

    Mr. MERLIS. No. I think it's part and parcel of airport capacity. It's totally acceptable. I just think that the proportion of money spent ought to go higher into safety issues than into roadway issues, but I think that roadways certainly are an appropriate expenditure of PFCs.

    Mr. DEFAZIO. And so that would extend to parking garages, I would assume?
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    Mr. MERLIS. I don't believe parking garages are permissible. They are not permissible under PFCs.

    Mr. DEFAZIO. How about transit on airport property?

    Mr. MERLIS. I think on airport property transit makes a lot of sense, if it's sized to what's needed. To build a transit facility, for example, between a terminal and a rent-a-car facility which is only going to benefit the rent-a-car companies, and for you have very little traffic, raises questions as to whether or not that's the highest priority. It's probably legal, but it raises questions whether that's the highest priority. That's why I think you need a needs test.

    Does it really make sense to put the money in for that transit project when there may be other higher priority and beneficial projects available?

    Mr. DEFAZIO. Well most of our major airports have developed long-term plans for staged growth, and normally they are looking at a wide range of needs. I mean, are you suggesting—who would, other than, say, an airport authority, determine their priority basis for the expenditure of these funds?

    Mr. MERLIS. I think that you would start with the proponent, the airport authority or the city, the airport management, which would demonstrate that the benefits to be derived are worth the costs to be invested. Then it would be submitted, as it is today, for approval to the FAA, and the FAA would validate whether or not that is accurate.
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    We had a situation a number of years ago where an airport proposed to build another runway, a complete ''field of dreams'' kind of situation. Its existing runway was less than 60 percent at capacity and it wanted to build another one, on the theory that if they built another one, more people would come there. Now, fortunately, that was not done. A lot of pressure was brought to bear. But had that application ever been submitted, the FAA probably didn't have any grounds to turn it down.

    Mr. DEFAZIO. Well, of course, there are conditions under which another runway, a cross-wind runway or a runway for use during IFR or something like that, might be—

    Mr. MERLIS. Definitely and, indeed, that would be safety-related, we would support it.

    Mr. DEFAZIO. Okay. Just more generally to the panel, one of the ideas I had when we originally did the PFC was we could get some leveraging with PFCs. And it's my understanding that there are still some problems with bond rating or bond issuance because of the ruling, the FAA ruling, on the potential for revoking PFC authority for noncompliance with noise rules and that. Does anyone there have a comment on that or had any experience with that?

    Mr. PLAVIN. Mr. DeFazio, there are a few communities which have been able to use the PFC to leverage bonds, and they have been doing that in two ways. The typical way that they have done it is to do it in conjunction with other sources of revenue. That adds to the total revenue stream in support of bonds, but it doesn't typically work by itself. It has been successful, however, in adding to the bonding capability of those airports that have done it that way.
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    There are, I believe, two cases where airports have, on a stand-alone basis, used PFCs in support of bonds. They have worked closely with FAA and the Department of Transportation to work out commitments, covenants, agreements, on behalf of the Federal Government, which then allowed rating agencies to give those ''stand-alone'' bonds an ''investment grade'' rating. In those cases, however, there has been a fairly high price to pay for those bonds in the form of the coverage that the rating agencies have required to rate those bonds investment grade. That is an issue which we are still working on, and obviously, to the extent that we can get more protection against the Federal Government's ability to lift the permission to levy the PFC, we think that would go a long way towards helping us increase the leverage that the PFCs now afford.

    Mr. MERLIS. I think Mr. Plavin has stated it quite well, but let me point out that 27 percent of all the PFC dollars approved go to pay interest. So, while the specific PFC may not be used as leverage, the revenues it is generating is being used to pay for projects which have been capitalized in the bond market. As I say, 27 percent, $4.2 billion, of the approvals is for interest payments.

    Mr. DEFAZIO. Well, what I would like to do is look at a way to reduce the interest burden, which means reducing the risk, which means looking for language in this—if we are going to revisit the PFC issue—that would allow greater assurances with bonding so we could reduce the interest burden, which is not a productive payment. So, I'm open to ideas on that and would be happy to hear from any members of the panel on suggestions in that area. Thank you.

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    Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Mr. DeFazio. Mr. LaHood.

    Mr. LAHOOD. Mr. Merlis, do you consider the PFC a tax on passengers?

    Mr. MERLIS. Yes.

    Mr. LAHOOD. What is the single most item or consideration that causes you the most heartburn about the PFC?

    Mr. MERLIS. I think the absence of a cost-benefit analysis to determine whether or not the project's really going to generate the kind of benefits. I'm sure that many of the projects will generate benefits, but they may be ten, 20, 30 years away, and it would make a lot more sense to have those benefits accrue and occur closer to the time that the tax is imposed and the project goes forward.

    Mr. LAHOOD. Do you think that the PFC has far more benefits or advantages than disadvantages since it's been in place?

    Mr. MERLIS. Well, I would not want us to repeal the PFC. I mean—

    Mr. LAHOOD. So you think it has been pretty good.
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    Mr. MERLIS. No, I think that the PFC—

    Mr. LAHOOD. Do you think it has had more advantages than disadvantages to airports?

    Mr. MERLIS. I think that in the absence of the PFC, the same projects would have been funded anyway.

    Mr. LAHOOD. How?

    Mr. MERLIS. By airline payments as one of the major revenue streams which supports airport expansion and—

    Mr. LAHOOD. Well, you have the airline industry that is not too gung ho about the PFC or raising it, why would they be inclined to do it otherwise?

    Mr. MERLIS. Well, sir, the majority of funds which go into airport capital do not come from either the PFC or the AIP program. They come from landing fees imposed on airlines, rental fees paid by airlines, privately financed facilities underwritten by airlines and other users of the airport, parking fees included.

    Mr. LAHOOD. So you think in the absence of the PFC, the airlines would step forward and do these things anyway?

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    Mr. MERLIS. I think they would do many of them.

    Mr. LAHOOD. Because you believe they have a track record of doing it anyway?

    Mr. MERLIS. That is correct.

    Mr. LAHOOD. I'm sure you've observed or been around the country and—but let me just tell you, in my own community of Peoria—and I also represent the State capital of Springfield, so I represent two significant airports. These airports have turned out to be probably the biggest economic development boon for most communities, and it could not have happened without the PFC, to be able to attract people to come to airports, to be able to use funds to attract a Federal Express or a UPS or some other kind of a military capability.

    We have a mail decoding facility at the Greater Peoria Airport, and in the absence of the ability to attract these, we would not have the jobs.

    Now, the notion that running a train line out into a community does not bring people in and then in reality provides economic development, you know, I just simply don't believe that it does. If you get people to come to an airport, they're going to spend money. And that's going to provide jobs, and it's going to provide taxes to the local government, to the State government, and to the Federal Government.

    Now, how would you say that that is not a good use of the PFC money?

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    Mr. MERLIS. Well, let me use the New York example. John F. Kennedy Airport is a slot-controlled airport. You can put all the trains you want to in there, but no more planes are going to land there. So what have you accomplished other than making it somewhat more convenient?

    Mr. LAHOOD. Well, let me use the example of another community like perhaps Denver. If people can't get to the Denver Airport, which is out in a God-forsaken place anyway, and if they can't run a train line out there, how are people going to get there? But if they do have a train line and people can get there, in reality, doesn't that provide people who are going to spend money, who are going to pay taxes and, in reality, that is, I think, a wise use of the money.

    Mr. MERLIS. Well, I think that we may have to disagree on some aspects of it. I think a train may make sense at Denver, but I don't think it should be put on the backs of the airline passengers.

    Mr. LAHOOD. So you think that a train that gets people out to the Denver Airport is a good idea?

    Mr. MERLIS. Not necessarily. I haven't seen the data to show that it is a good idea. I'm commenting on the use of airport revenues for such a purpose. For example, the airlines are paying for the on- airport portion of the train at San Francisco. The airlines are completely in accord with the train at St. Louis, in Chicago, in Cleveland. In numerous places the airlines have stepped up, and it's part of the capital structure of the airport that the airlines pay, and it's a fine idea. It's going off-airport where there is not necessarily a cost-benefit or where there are other sources of revenue that we believe ought to be used other than airline passenger revenue.
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    Mr. LAHOOD. If you had your way, would you eliminate the PFC?

    Mr. MERLIS. No.

    Mr. LAHOOD. What would you do?

    Mr. MERLIS. I would leave it exactly as it is and impose a cost-benefit test.

    Mr. LAHOOD. Now, tell me how that would work. So what you would have is a bunch of consultants running around doing studies on whether things really make sense and, in reality, we'd be years and years and years knowing whether these things really make sense. You know how long these studies take, and the enormous cost of them. Who is going to bear the cost of that? Do you take that out of the PFC?

    Mr. MERLIS. Well, right now a very substantial amount of the money which the PFC is paying for is going to these consultants. If you take a look at the numbers, you're probably close to—of the $18 billion, almost a billion dollars is going to consultants.

    Mr. LAHOOD. Well, you must be happy about that then.

    Mr. MERLIS. Well, regrettably there is no cost-benefit test. They are doing this work and it's not subject to the kind of evaluation that would—that ought to be scrutinized and that ought to be scrubbed and that a business case ought to be made for.
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    Mr. LAHOOD. How long would a cost-benefit test take to determine whether a train running into Kennedy Airport would be cost-effective? How long do you think that study would take, and how much would it cost?

    Mr. MERLIS. Well, I believe that the studies have already been done and, if one were to examine them, you would find—and they cost somewhere in the $20-odd million, it's been 5 years in the making. If you would examine them, you'd find that the time to go from Penn Station to the airport will be reduced by 8 minutes, or the average traveler will have an 8-minute reduction in getting to the airport as a result of this project. I think it probably takes 8 minutes to get from the front door of Penn Station to the train.

    Mr. LAHOOD. So it is pretty much an unwise use to spend $5 million when you know the answer to begin with and it takes 5 years to do it. I mean, you've pretty much answered your own question. It's a waste of money and time and energy to do a study that costs $5 million, or $20 million and takes 5 years, when you know in reality what the answers are.

    Mr. MERLIS. That was the result the consultant came up with.

    Mr. LAHOOD. But that's something you're promoting. You're promoting the expenditure of $20 million in a 5-year span to answer a question that you already know.

    Mr. MERLIS. I only know it because of the consultant——
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    Mr. LAHOOD. But aren't you promoting that idea?

    Mr. MERLIS. I'm promoting the idea which would have meant that you don't spend $1.5 billion on the train once you take a look at the objective criteria.

    Mr. LAHOOD. But you're promoting the idea of spending $20 million for a 5-year study when you already know the answer, which you've already stated. I think the other gentleman wanted to speak.

    Mr. PLAVIN. Mr. LaHood, you've put your finger on the fact that, in fact, there are studies that go on today. FAA does mandate them. In fact, the process for almost any project that one wants to undertake on an airport requires the equivalent of a cost-benefit analysis, an environmental impact statement, and an economic study. All of those are required by FAA and/or other competent agencies in reviewing these projects.

    And the thing that I cannot understand about this process is that the passenger—the quality of passenger service doesn't seem to be an issue for the airlines once a passenger gets off the airplane. How you get to the airport ought to be a significant concern for people who are interested in promoting aviation and the economic benefits that it provides.

    In fact, the real issue, is that as airports become more congested, the big problems at airports are going to be on the terminal and landside, how people get there, how good is the quality of their experience, how awful a trip it is while they are waiting to get on the airplane, which today isn't a wonderful experience in itself. So, it seems to me that to single out any particular piece of the overall travel experience and say, well, we'll do this piece and not do that piece, is typical of the way a private carrier with private shareholders would look at things, but it's not the way, it seems to me, that airports and their communities need to look at things.
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    Mr. LAHOOD. Mr. Chairman, may I just proceed for another minute or two? Let me just restate something that I said. I really believe this very strongly. I think the AIP money leveraged against the PFC money has really worked well. And you can't just look at these airports as a place where people get on and off of airplanes. These facilities today are probably in some cases, in some communities, the biggest economic development boon to any community in terms of the jobs they provide, in terms of the other auxiliary services that they provide, in terms of opportunities for people who may never have another kind of opportunity to work. And you can't just look at them as a place where people get on and get off airplanes. They are much more than that today, particularly in communities like Peoria and Springfield and a lot of other communities around this country. They are much more than that. And I think the PFC money leveraged against the AIP money has enabled communities to do things that they would not ordinarily have been able to do.

    And I don't believe, with all due respect to my friends in the airline industry of whom I have many and I have high regard, particularly for United and American—I don't want to make them mad at me—but the point is this—I don't agree with you that they'd be doing all these things if we hadn't had these pots of money to be able to do them. And I don't think it would happen in my community where the big airlines have abandoned Peoria and Springfield. And, again, with all due respect, we have these puddle-jumpers that we all hop on and fly on, which are—well, we'll save that for another day, but the point is, our airport in my home community and the State capital in Illinois are some of the biggest job providers because of the two pots of money that we've been able to use to leverage against one another to do some of the things that are happening there. And I don't think we would have been able to do them without it and with just the airlines stepping forward.
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    So, I support the notion of PFCs and a strong program increasing it because I think it makes a lot of sense in terms of where we want to go in the future with our airports. And I thank you for your indulgence, Mr. Chairman.

    Mr. DUNCAN. Thank you, Mr. LaHood.

    Mr. Traficant.

    Mr. TRAFICANT. Thank you, Mr. Chairman, I have a couple of questions and statements, but first I would like to ask unanimous consent that my official statement, as printed, be placed in the record.

    Mr. DUNCAN. That will be placed in the record.

    [The prepared statement of Mr. Traficant follows:]

    [Insert here.]

    Mr. TRAFICANT. Second of all, a couple of points I want to make in support of what Mr. LaHood is talking about. If we are to have a Passenger Facility Charge, we should be able to help get people to and from the airport and help accommodate them.

    Second of all, I don't know—and maybe you can submit this in writing—have any of you ever tried to get from Penn Station to Kennedy Airport during rush hour? Maybe you could submit that in writing to the Committee because that's a big one.
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    I have two questions. One deals with safety, one deals with competition. The first one on safety is, we've had a number of incidents where aircraft, through bad weather conditions and fog, have caused some serious, serious accidents and death.

    And I want to know what you're doing about looking into new technology such as the use of laser flight guidance technologies that have proved to be so successful in military applications and that are reasonably adapted, could be placed on any airfield quite inexpensively. And for the life of me, I'm trying to figure out why we're not adapting to these types of new systems that are cost-effective and will save lives.

    Anyone want to jump in on that? I mean, I'm just ready.

    Mr. MERLIS. Well, if I may—

    Mr. TRAFICANT. Go right ahead, Chairman.

    Mr. MERLIS. The airlines are currently funding a program using what's called ADS–B, automatic dependent surveillance broadcast, which they are doing at their own expense because they believe this is one of those kinds of technologies which will enhance the ability to keep planes from running into each other and enhance the ability of planes on the ground to know where each other is.

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    The FAA has a program underway, ASDE, automatic surface detection equipment. But most of the responsibility falls on the Federal Government because ultimately they are the ones who certify whether you can put the equipment in the plane. Airlines spend money on it, but a lot of it is a Federal Government priority.

    Mr. TRAFICANT. Let me ask you again, are you familiar with laser-driven guidance and landing systems that a plane locks into regardless of whether inclement conditions, and brings it in and touches it down at the same spot almost every time, and the military is using it. Are you familiar with the system?

    Mr. MERLIS. No, I am not.

    Mr. TRAFICANT. Okay. I think that's my first question, and I think that we should maybe require that some of these technologies that have been proven to save lives should be at least reviewed and looked into.

    Second of all, I want to commend former chairman of this Committee, Norm Mineta, for his work on the National Civil Aviation Review Commission, and I know we'll be looking at that. And some of that may be a little controversial, but I think it speaks to some problems that are not being blamed on anybody but certainly can help to resolve some of our different situations.

    But I also would now like to ask a question about competition. I'd like to know what's the level of Federal spending you plan on airports and air traffic systems, and how does that investment compare to our competitors in Japan, China, and Europe? In other words, what I want to know, are we keeping up with our foreign competitors?
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    Mr. BARCLAY. Congressman, I'd like to start out on that because I think you've hit on a point that we've been trying to take home to policymakers wherever we can. And you really have to start with looking at the geography of the United States compared to the geography of Japan or Germany.

    Japan is a country that fits in a land mass the size of New England, Germany is about twice the size of Wisconsin, meaning those countries can effectively use roads and railroads to move their internal economies, to move people and resources quickly around their entire economy.

    When you are four time zones wide, you only have one transportation system that can quickly move people and resources across its entire width, and we've got to have a high capacity, high technology aviation system or we're not going to keep up and compete. But if you look at the investments going on, despite that, where we should have a greater incentive to make these investments, if you look at the government of Malaysia, Kuala Lumpur is paying $3.8 billion to build one new airport. The government of Germany at Munich a few years ago spent $6 billion to build one new airport. The government of Hong Kong has spent $25 billion to build one new airport, when they were a country, for an economy that is one-fiftieth the size of the United States.

    We're here debating for AIP, $1.7 billion for 3400 airports nationwide, and PFCs—Ed keeps talking about $18.5 billion, which is over the entire life of all the approved projects—but the PFCs are bringing in $1 billion a year additional for 3400 airports nationwide. The new project at Minneapolis is by itself $1.7 billion just to enhance the Minneapolis airport.
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    So when you compare the investments we are making compared to the infrastructure investments being made throughout the world, you get a sense of the scope. We are not anywhere near being in danger of overinvesting in airport capacity, which I think is the point that the airlines keep trying to make. We couldn't disagree more strongly.

    Mr. TRAFICANT. Well, let me just offer this and then I will close. You've had real friends on this Committee—Mr. Shuster, Mr. Oberstar, Mr. Lipinski, Mr. Duncan, and Mr. Duncan, as Chairman, has been a friend to all of that community.

    I think it's incumbent upon you to take a look at some of those issues and make your presentation to the Congress. Congress wants to help, and I don't know why we get into these traffic jams.

    I'd also like to say this, because we continue to meet over phenomenon of accidents, and even though our rate is very good compared to other systems of transportation, without demeaning our safety, to hear that we have a successful guidance system in place and we do not have it even being looked at by the Federal Aviation Administration, to me, is down right ludicrous. I mean that. And Members of Congress shouldn't have to be bringing forth these types of safety initiatives that should be advised to us by FAA.

    So, with that, Mr. Chairman, I want to yield back my time and ask for your consideration when I present an amendment in the FAA authorization bill that will apply some of these technologies to safety.

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    Mr. DUNCAN. Thank you very much, Mr. Traficant. Mr. Pease.

    Mr. PEASE. Thank you, Mr. Chairman. I apologize to the members of the panel and the Members of the Committee. I was at a markup in another committee meeting this morning, and since I did not hear your testimony nor the questions that have been asked, and don't want to be duplicative of what may have already been addressed, I will say I thank you for the material you have provided for our reading.

    I am sympathetic to the concerns raised by the airports. I understand the arguments made by the airlines. But I'm not convinced that we're doing enough investing yet. And I do want to hear what's been provided to us.

    Actually, the real reason I'll decline to ask questions, Mr. Chairman, is, if I've learned anything here this year, it's not to follow Mr. Traficant if you have the choice. Thank you very much.


    Mr. DUNCAN. Ms. Brown.

    Ms. BROWN. Thank you, Mr. Chairman. I'm glad we're giving a hearing for the AIP reauthorization and looking at PFCs. I think this program is critical to airports in Florida that's experiencing remarkable growth due to international trade and the tourist industry.

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    I'm looking forward to a frank discussion of how we can best assist this country's airports as our good economy continues to place demands on all modes of infrastructure, particularly aviation.

    My question for the panel, the airports in Florida are experiencing expansion and growth issues, most of which concern capacity projects. Is a PFC increase a way to get funding for these capacity projects, or what do you recommend?

    [The prepared statement of Ms. Brown follows:]

    [Insert here.]

    Mr. PLAVIN. Ms. Brown, I think that the answer is clearly yes. While I think many projects can and are being funded with airport and airline agreement, there will be situations where capacity growth is not necessarily consistent with what the dominant carrier at a particular airport may want to support.

    In that context—and because airlines have consistently supported certain kinds of growth programs with PFCs—we believe that the PFC is essential and probably cannot be understated in its importance to making capacity improvements. That is not to say that there won't be capacity improvements done with the mutual support of airports and airlines, but it is almost assuredly the case that some will not be done without the PFC.

    Mr. FEGAN. I have to echo Mr. Plavin's comments from our airport's standpoint, Dallas/Fort Worth International Airport, virtually all of our PFCs have gone toward major capacity enhancements at the airport, including a new runway as well as terminals and environmental impact statements for runway extensions and really capacity-related projects that were vitally needed.
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    Earlier a question was asked about would some of these projects have moved forward without Passenger Facility Charges in place, and I will tell you that even as we prepare to plan and design our new east side runway that was just finished a year ago, in the early discussions without PFCs, we did not have full airline support for that new project. With PFCs in place, the airlines saw that the financial impact was not going to be tremendous on the rates, fees and charges, and they agreed to actually go ahead and fund the remaining balance of that project.

    The PFCs have clearly played a giant role in our airport's growth and development, especially in the areas of capacity.

    Mr. MERLIS. I think Orlando's experience is a good example of what happens. Between the combination of the PFC and the airlines guaranteeing payments through their landing fees, rates and charges, bond payments and the like, Orlando is going ahead with a very substantial capacity increase.

    I think it's important to note, though, that if you increase the PFC by $2.00, from $3.00 to $5.00, travelers to and from Florida would pay $420 million more over the next 5 years.

    Ms. BROWN. (Microphone not turned on)—not due to the fact that the airline is more leisure travel, and they left because they didn't have the business traveler. In deregulation, is there any obligation on the part of airlines to provide service to the traveling public?
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    Mr. MERLIS. When the Congress passed the deregulation act in 1978—Mr. Barclay could speak extensively on it since he worked on it—the standard which required public convenience and necessity was removed. That was the compulsion to provide service and the CAB directed where airlines provide service. That was eliminated and the statute was changed to say that an airline could provide service if it was fit, willing and able—financially fit, basically, safety fit, and the like. Therefore, it is a deregulated environment and the Government has removed any obligation to provide service to any specific community. To compensate for that in part, they did create the essential air service program which provides air service in some communities.

    Mr. BARCLAY. Ms. Brown, while there's no obligation on the part of carriers to serve, your question helps make the point that—Ed keeps referring to the largest airports where airlines do step forward, like Orlando, to build facilities—that's not true in smaller airports where sometimes just for the market—the market may not make sense if they have to come in and provide service and make major investments in facilities. Airlines don't volunteer to do that, and that's why the PFC program is very, very important at the smaller airport.

    Ms. BROWN. Thank you, Mr. Chairman.

    Mr. DUNCAN. Dr. Cooksey.

    Dr. COOKSEY. No questions, Mr. Chairman.

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    Mr. DUNCAN. Mr. Boswell.

    Mr. BOSWELL. No questions.

    Mr. DUNCAN. Mr. Lipinski.

    Mr. LIPINSKI. Thank you, Mr. Chairman. First of all—and I'm sure there's one member of the panel who will be happy to answer me on this, but if any of you want to answer me, please do so—why should the Federal Government have the ability to prevent airport authorities all over the country from imposing any kind of fee they want to impose and how much they want to charge. If they want to impose a $10 PFC, why should the Federal Government stand in their way? Where does the Federal Government get this power an influence? Shouldn't the local municipality be able to charge what they want? And if the airlines don't want to fly in there, then they wouldn't fly in there. Okay, Ed.

    Mr. MERLIS. The commerce clause. Congress, in implementing or creating laws to effectuate the commerce clause decided that local communities should not be in a position to create barriers to interstate commerce. In 1990, Congress changed that and said we'll repeal a portion, we'll create an exception to the Anti-Head Tax Act to allow communities to impose these taxes up to $3.00. But that's really where the power derives from.

    Mr. LIPINSKI. Okay. But at one time, PFCs were possible and then they were done away with. Now, anybody on this panel have anything to do with doing away with them at the time?

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    Mr. MERLIS. Yes. In 1973, the Anti-Head Tax Act passed.

    Mr. LIPINSKI. Okay. Prior to that, though, there could have been PFCs, and I frankly don't know if there were or not. Were there any PFCs?

    Mr. MERLIS. Over 50.

    Mr. LIPINSKI. There were over 50. Okay. So, the local airports imposed these PFCs, and no one really said anything about it or did anything about it, and then what happened?

    Mr. MERLIS. Chaos.

    Mr. PLAVIN. Well, I think ''chaos'' is an airline term of art, but it's basically a reflection of the fact that the communities in some cases were rather bold about using the money that they had raised for non-airport purposes. In this day and age, however, we believe that there is more than ample protection in the form of restrictions on revenue diversion, so that that kind of problem doesn't exist, today. With that kind of protection, I think we would agree with you, there shouldn't be any limitations on the kinds of dollars that can be raised and the projects for which they can be used.

    Mr. LIPINSKI. Well, let me ask you this question. If we were to write a new bill, and say what I jokingly said at the opening of this hearing about let the local municipality or airport authority charge whatever they want. If they want to charge $10 and say you can use it for anything within 50 miles of the airport, is there any other law around that would prevent us from writing a law like that and, if we could get it passed and signed into law, do we have any conflict? Ed?
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    Mr. MERLIS. Well, I would hope you wouldn't want the airlines to collect it. One of the things that——

    Mr. LIPINSKI. No, no, no, no, we'll get to that later on. I'm just saying is there any other law floating around out there that we would be in conflict with?

    Mr. MERLIS. I'm not aware of any.

    Mr. BARCLAY. Congressman, clearly, under the commerce clause, Congress can limit the ability to put these kind of charges on. The question is, should they, and if you think about fuel taxes for building highways and roads, the Federal Government doesn't step in and limit what local governments can and can't do on that, and often the marketplace—there are controversies right now in states because fuel taxes.

    Mr. LIPINSKI. Okay. So not that any of you are advocating it, but if we were to write a bill that said it's going to be whatever you want it to be—Chicago, Miami, Milwaukee—and you can use it for whatever you want, that would not be in conflict with anything else standing out there? Obviously, I'm not asking—I'm just trying—you fellows here have a lot of experience in this area, I'm just trying to pick your brain. In one case probably you're happy about that, in another case you're probably not happy about that.

    Mr. MERLIS. I don't think it's in conflict with anything in the Constitution. I mean, there are Federal laws which prohibit it, but you could repeal those laws, too.
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    Mr. LIPINSKI. Okay. Very good. Thank you. With that, I will leave that briefly.

    If we increase the PFC, would you be willing to give up all your AIP funding?

    Mr. FEGAN. I think from the DFW Airport standpoint, we certainly would feel very comfortable giving up all the entitlement funds that we currently receive.

    Mr. LIPINSKI. How much do you receive at the present time?

    Mr. FEGAN. About $9 million a year.

    Mr. LIPINSKI. Okay. So if you didn't have a PFC in place, you'd be receiving about $18?

    Mr. FEGAN. Yes, that's correct.

    Mr. LIPINSKI. And the max you could receive would be $20, right?

    Mr. FEGAN. I believe so, yes. Again, the only—there are some situations where you have some pretty critical projects such as runways that have national significance. I mean, from our standpoint, we would certainly like to be able to compete for discretionary dollars for some of those nationally important projects.
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    Mr. LIPINSKI. If we give you the ability to increase the PFC and maybe give you a more liberal PFC, I would think that you would be willing to give up that AIP money entirely that we were referring to so it could be utilized perhaps to subsidize essential air service in other parts of the country, which an awful lot of people—let me tell you, a lot of people on this Aviation Subcommittee are enormously concerned about essential air service and it being maintained.

    You were talking about what percentage isn't being funded by PFCs of your terminal expansion?

    Mr. FEGAN. For a terminal expansion that we have underway, for example, I think about 77 percent of the project is PFC-eligible. The remaining, of course, is not. And that's where you have to come up with other funding sources, either corporate cash from the airline or from joint revenue bonds.

    Mr. LIPINSKI. But those are—the portion that isn't is because they generate revenue?

    Mr. FEGAN. Yes and, again, things like concession space or airline space or even fueling facilities, the problem is if you are trying to build a terminal building for new entrants, for example, the burden for a new entrant to come in and put up $20 or $30 million of their own money just to start service becomes very, very burdensome. And we'd like to have the flexibility as an airport to be able to build facilities on a somewhat speculative basis so that new—
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    Mr. LIPINSKI. Thank you. We have to break, but we'll be back.

    Mr. DUNCAN. We'll break very briefly for these votes and be back. We're in recess.


    Mr. DUNCAN. All right, we'll go ahead and have the witnesses take their seats once again, and we'll go back to Mr. Lipinski so he can finish with his questions.

    Mr. LIPINSKI. Thank you, Mr. Chairman. Mr. Barclay, if we were to raise the PFC at the present time, what would you like to see it increased to?

    Mr. BARCLAY. Our position is that the ceiling should be eliminated because it's not an issue of ''one size fits all''. You have some airports that would like to have a fairly large increase in the PFC for a very short period of time and save the money on interest that you'd spend in bonding some project because often that winds up being in the best interest of the airlines, and airlines often agree to those kinds of arrangements.

    Mr. LIPINSKI. Well, if we do that, I don't think—if we do lift the cap, I don't think we're going to get rid of the cap, so let me ask you, what would you be satisfied with at the present time?

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    Mr. BARCLAY. I certainly think our members would like to see at least another $3.00.

    Mr. LIPINSKI. So you'd like to go to $6.00?

    Mr. BARCLAY. [Nodding head.]

    Mr. LIPINSKI. Have you said anything in your statement, or do you have anything that you'd like to submit in regards to what you believe the criteria should be for a PFC?

    Mr. BARCLAY. We believe in the current process—in a different explanation than Ed would give you—our members believe that there is a lot of examination that already goes on. In fact, they have complained to us about too much involvement of FAA.

    We would like to see the current process continued. Airports do perform cost-benefit analyses on these projects, the airlines just disagree with the conclusions of those analyses of the project. They are then reviewed by the FAA and they are only eligible for the kinds of projects that are narrowly defined—as Jeff has pointed out, you can't even fund all of a terminal building which are the kind of changes that should be made. So, you are limited both in what you can spend it on and whether or not you can spend it because you have to convince the FAA you're right, particularly if the airlines are disagreeing with you.

    So, all those protections should be kept in place, but we just need more money to come into the system to build what's needed.
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    Mr. LIPINSKI. Ed, since the PFC is really passed right along to the traveling public—every time I hear an ad in Chicago for Southwest Airlines, they tell me what it costs to fly from Chicago to Dallas, or Chicago to Cincinnati, plus the $3.00 Passenger Facility Charge, so we know it's passed on, just like if it were to be increased to $6.00, that too would be passed on to the flying public.

    In light of that, what really is the motivation of the air carriers in not wanting to see a PFC increase because it seems to me, in all honesty, that if you don't have a PFC and if you don't have an increase, the people are going to wind up paying—now maybe they would have more direct control over the situation, but the people who are going to wind up paying more are going to be the air carriers. I mean, it's going to be United, American, Delta, right on down the line. Those are the people who are going to really come up with even more money than they come up with now, for all the aviation improvements.

    So, in light of the fact that this PFC really gets passed directly along, I really find it a little difficult to understand or comprehend why the air carriers seem to be so united and so aggressive in opposition.

    Mr. MERLIS. Sir, I think that we, first of all, do not believe that it is always passed along. We think we ''eat'' a lot of it. Right now the economy is good, it's not that difficult to pass along costs. But, fundamentally, the carriers' fares reflect a competitive price with the PFC included in it.

    To have, for example, the $29 ticket which Southwest might have, with a $10 PFC, might actually cut into their traffic. So, I think—
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    Mr. LIPINSKI. But if everybody had the $10 PFC in that market, which they would, why would it cut into Southwest's traffic?

    Mr. MERLIS. Well, I think because the niche which they are marketing to, you start adding up $1.00 here, $1.00 there, sooner or later it adds up. But to answer your second question, the airlines would much rather pay for these projects through a variety of give- and-take negotiations, rates and charges, terminal rentals, and the like, because that way they can subsume those costs into their overall cost structure, and not tag it on to the specific market. For example, the $10 PFC out of Midway and a $3.00 PFC out of Cleveland, the carriers might be just as willing to do both projects, pay the capital on both projects, but have the $3.00 PFC in both places. In one place, perhaps they'll absorb it, another place they may have it manifest itself in slightly higher fares.

    Mr. LIPINSKI. The problem I have with my own argument, though, in regards to the air carriers paying more money, which they would be doing, is that, it was mentioned earlier, from new entrants, it certainly would put a handicap on new entrants coming into the market if any expansion, any improvement, anymore gates, taxi-ways, runways, are going to be primarily funded by the air carriers, maybe that's why they're much more interested in doing it that way, to keep out competition. Of course, that's something we'll get into later on, we're going to have hearings on competition, but if you have anything you'd like to comment on now, Ed, go right ahead.

    Mr. MERLIS. Well, let me use the example of San Francisco. The carriers have agreed jointly to fund a $2.8 billion project. All the carriers are going to pay for it based upon landing fees, rents and charges, lease payments and the like, and there's no PFC whatsoever.
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    So the fact is that you conceivably could have done—I don't know what the traffic volumes are—you probably could have done it with no increase in rates and charges, landing fees, and the like, and a $20 PFC, if the law allowed unlimited PFCs, but it's in the carriers' interest to have absorbed those costs, figured out how they are going to allocate them based upon the kind of ticket, the market in which they are selling the ticket, the kind of passenger, those kinds of things. In effect, it might mean that the first-class passenger to Japan out of San Francisco is paying $100 of the cost—but then again it's a $3,000 ticket—and the passenger who is going on Southwest or shuttle by United for $49 is only paying 50 cents of that cost instead of having that substantial PFC. So, the carriers there have financed it in that mechanism.

    I used the example of Orlando. We've got lots of places where that give-and-take has resulted in the carriers either with the PFC or in places like San Francisco, without a PFC, financing the capital.

    Mr. LIPINSKI. Even in San Francisco, have there been any problems in regards to competition, you know, other carriers trying to get in there and not having the slots, not having the gates available? I'm asking you the question, has there been any problem that you know of?

    Mr. MERLIS. I'm not aware of any. The only problem I'm aware of in San Francisco is in the sky and being able to get all the planes in and out, but there's not a gate problem that I'm aware of.

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    Mr. LIPINSKI. Anybody else want to comment on what Ed just had to say there?

    Mr. PLAVIN. Mr. Lipinski, I think there are two other reasons why airlines prefer rates and charges, sometimes. One of them is that there's a whole different treatment of your obligations on a Passenger Facility Charge funded project with respect to how you portray your accounts.

    If a project is done with PFCs, chances are they don't appear on airline books as obligations, and that obviously can have an impact on an airline's financial well being and the way it portrays it to the world. But I think more importantly, the PFC is the only source of airport funding where the airlines don't play a major role in the final determination. It's the only one. The bulk of investment funding, which comes from bonds, are reflected in rates and charges and rents. That, as Ed Merlis said, is a negotiation that takes place between the airports and the airlines, and they have to reach some accommodation.

    There are occasions where the airlines don't agree and where the PFCs have been used to build those kinds of things with which the airlines don't agree. That's, in my recollection, what the PFC was intended to do. That's what it's still needed to do, and which its dollar amounts are now falling short of doing. I think those are also reasons why the airlines are not happy with the PFC the way it's now structured. Also, the fact that it has lost a good deal of its purchasing power, because it has been capped at $3.00 for the last 7 years, is another principal reason why we have been pushing for a significant increase in those dollars. And, add to that the growing needs reflecting the huge growth in passengers.

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    Mr. LIPINSKI. I see my time is up, and I realize that you've been here quite a long period of time. I just want to say two things. One, if you have any—and you don't have to give them to me today and you don't have to make them public—but if you have any evidence in regards to where PFCs have been used for frivolous things, I'd like to be made apprised of that. But I would also like to say that I appreciate your testimony here. I'm always amazed at the people that we have come to testify, how knowledgeable they are. And quite often their backgrounds and what they've done in the past is very illuminating and enlightening to me. Thank you, Mr. Chairman.

    [The information received:]

    [Insert here.]

    Mr. DUNCAN. Thank you, Mr. Lipinski. Mr. Cummings.

    Mr. CUMMINGS. Mr. Chairman, I don't have anything. I think my questions have been pretty much answered.

    Mr. DUNCAN. Okay. Thank you very much.

    Mr. Plavin, you mentioned just a moment ago that the PFCs were the only types of charges or financing that the airports have that the airlines aren't involved in. Some people say that this really is a battle more over control than over money because PFCs do give the airports total control or complete control. What do you say about that?

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    Mr. PLAVIN. Well, I agree that it is very much an issue of control.

    Mr. DUNCAN. You've got other ways to get money?

    Mr. PLAVIN. Well, in some cases you have other ways, but in some cases you don't, and this is particularly true for larger airports and, of course, it depends on the underlying agreement. Almost every airport has an underlying agreement between the airport operator and its tenant carriers. In some cases, those agreements obligate the airlines to pay for the full cost of running the airport, but that also gives the airline the opportunity to say no. In other cases, it's not necessarily structured that way.

    At the same time the overwhelming bulk of PFC projects are approved by the carriers in negotiation with their airports. And I think that's a good thing. So, I do not agree with the characterization that there is no involvement in the current PFC. There are frequent and intensive negotiations. In the process, PFC funded projects are often traded off against other projects that might be done with bonding. So, in one airport's case, you might do a project with PFCs and leave project No. 2 to be paid for with bonding. In a second airport, it might be exactly the reverse.

    That's one of the reasons why I led off my earlier comments by saying you can't look at PFCs by themselves, they really have to be viewed as part of the larger array of funding sources that airports have available. But the one thing that distinguishes PFCs from the others is that when push comes to shove, after all the negotiations, if an airport really feels very strongly that its eligible project needs to go forward, PFCs make it possible to do that.
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    Mr. DUNCAN. Mr. Fegan, you mentioned earlier, I think, a $4 billion expansion, is that roughly correct?

    Mr. FEGAN. Yes, sir.

    Mr. DUNCAN. And you sounded pretty certain about that, that you're going forward with that, and it sounded like you're going to go forward with it whether you get an increase in PFCs or not.

    Mr. FEGAN. No. I think that project, all the projects in that airport development plan really are contingent on having adequate funds. And, again, typically, we work very closely with the airlines, but unless we are willing to take on as much as triple the amount of debt that we currently have, we're not going to be able to fund the projects with the current PFC at $3.00.

    Mr. DUNCAN. Yes, I heard you say that you have about a billion dollars in debt now, and you need about another $2.6 billion in debt.

    Mr. FEGAN. Yes.

    Mr. DUNCAN. If I was on your Authority, you'd have a hard time getting me to approve that much debt.

    Mr. FEGAN. Again, that's why the PFC plays such a critical role in our future funding needs.
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    Mr. DUNCAN. Mr. Barclay or Mr. Plavin, has anybody done any study or looked at whether the projects that are needed the most in the next few years, are most of these projects runway and safety and security type projects, or are they more passenger convenience type projects, or has anybody really studied that?

    Mr. PLAVIN. We've actually done a fairly detailed study of that, and the problem, of course, is that it's not going to be the same from one airport to another. It will vary based on how old an airport is, etc.

    Mr. DUNCAN. Well, I know you would have some variation from airport- to-airport, but I'm just talking about in general or overall.

    Mr. PLAVIN. Overall, what we found is that the needs are spread across the entire airport. They are spread from aeronautical improvements such as runways and taxi-ways, very big requirements for terminal improvements, enhancements, enlargements. That's a very significant issue right now, and what will come immediately behind it are the other landside improvements, the roads and the access.

    Mr. BARCLAY. If I may add, too, Mr. Chairman, passengers are growing faster than operations are. And you can also increase the size of airplanes to get more people through an airport. So, there are good reasons—one of our frustrations with the debate we have here in Washington is, we keep hearing from our members in the field that where they are getting PFCs agreed to, the carriers locally like PFCs to be used for terminal projects because sometimes those terminal projects have to be carried on the airlines' books—if they are done with rates and charges. Airlines can get off their books if they are done with PFCs and pay for runway projects through landing fees, because those facilities don't go on airlines books. So, there are these accounting incentives to use PFCs on the landside and then we come to Washington and get beaten up for using them on the landside.
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    There are a number of things going on out in the system that I think are behind the numbers being given to the Committee about where PFCs are being spent.

    Mr. DUNCAN. We had a hearing here just a few days ago in which an FAA witness mentioned that, that while the number of passengers is going way up, that the number of airport operations is basically staying the same. Is that what you all are finding? You sort of mentioned that, Mr. Barclay.

    Mr. BARCLAY. Yes. In fact, we're expecting—and I think the FAA's published forecasts will give you specific numbers on it—we're expecting that in the same period where passenger growth is expected to be 50 percent, that's the next 10 years, they are only expecting about a 10- to 15-percent growth in operations during that period. And at the same time, they are also projecting a year-by-year regular increase in the average number of seats per aircraft movement. And that is, indeed, the way we, especially the larger airports, have experienced a good portion of their growth, is in larger and larger aircraft and not in more movement.

    Mr. DUNCAN. This discussion or controversy or battle or disagreement, however you want to describe it, over PFCs, is mostly mentioned as a disagreement between the airports and the airlines. But what about the passengers, are we at or near a breaking point, Mr. Merlis, on air fares?

    I saw recently an article that said business fares had gone up 41.9 percent in just the last few months, and you see all these different figures, and it's so hard because I know that on any particular flight you have, all these passengers flying at different prices, but I'm told that since deregulation air fares have gone down 30 to 35 percent, adjusted for inflation, and so forth, but a lot of people around the country feel that air fares are going up. Are they going up, going down overall, and have you done any studies or taken any surveys? Would they notice an increase in a PFC at this point? You mentioned yourself that because the economy has been good that you can pass on costs. Would the passengers notice a small increase in the PFCs, do you think?
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    Mr. MERLIS. I think the passengers would notice an increase. Let me give you an example. In Tennessee, the average traveler has three PFCs per trip. You can have a maximum of four PFCs on a round trip, but counting the actual transactions that people have, for the actual traveler, the airports they go through, the number of coupons on their round trip, there are three. So, that means the average traveler is paying $9.00. He sees that on his ticket. If you had a $6.00 PFC, you'd now have $18 on your ticket.

    It's much better from a competitive standpoint, I think, for the carriers to be able not to put that extra $9.00 on the ticket, but rather to say some portion of it is going to be charged to the full first-class passenger, and some smaller portion we're going to put on this full fare coach passenger, and some smaller portion is going on that deep discount leisure traveler—we're not going to add $9.00 to his ticket, we'll add nothing to his ticket. And yet we still raise enough money through rates and charges, landing fees, and the like, to take care of that capital project. And that's what we would rather see than have to add on to the ticket another $9.00, or the ticket set another $9.00 for that capital project. Blend it into the fare that you're charging based upon how you best can pass it on, if that's the word, when you can pass it on. Some years we're not able to pass it on.

    Mr. DUNCAN. Do the airlines ever support any terminal or access or expansion projects or passenger convenience projects and, if so, how should they be financed, if not financed by higher PFCs?

    Mr. MERLIS. Well, I used the San Francisco example before, which is about $2.8 billion, consists of a major new terminal, roadways, the on-airport portion of the San Francisco or BART subway system, and all of that is being funded without PFCs.
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    Next week, I'm going back to Juneau for the second time this winter to testify before the state legislature in support of expansion and construction of Anchorage Airport which will be financed by rates and charges, airline guarantees of the bonds, as well as ISTEA funds and state highway funds for some of the road construction.

    The Orlando situation is another airport where a combination of PFCs and increased payments from carriers are financing it, and we supported these things. So there are lots of—right now we have a big Tampa capacity study underway, and I'm sure when the end product comes out, the airlines will sign up because we believe that's where there's a need for expansion and increased activity.

    Mr. DUNCAN. Mr. Blunt got into this earlier, but somebody was talking to me at the time and I did not hear the answer, but the Administration projects that there's going to be an $8.6 billion surplus in the Aviation Trust Fund by the end of the next fiscal year, and that's being paid for by the passengers.

    Is that not enough money, when you add in the other sources of revenue? If we were spending more money out of this Aviation Trust Fund, would that—do you think it would be necessary to raise these Passenger Facility Charges?

    Mr. BARCLAY. I think it would—the National Civil Aviation Review Commission also noted that even if you have a $2 billion AIP improvement program, you're still going to, in the future, need to increase the PFC.

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    GAO did a study that confirmed a study that we've done that says that the average needs are about $10 billion a year. And right now the average has been running about $6-7 billion a year. That's been going on for about 5 years. You've got to make up some of that, and you have going into the future a program that is falling 30 percent short.

    So even if you could get your hands on all that, clearly it would be good to get our hands on that. We'd be happy to get our hands on that first, but this Committee knows very well, is easier said than done.

    The airports need to start spending and building now. They've been sitting on things. Throughout the '90s when the airlines were in difficult financial trouble, very few approvals were going through for major projects. We've got to start rebuilding the system again if we're going to meet these passenger growth projections that clearly are coming with the good economy.

    Mr. DUNCAN. Mr. Merlis, isn't it a little harder to get the airlines to look as far into the future as the airports have to on some of these things?

    Mr. MERLIS. I don't doubt that it's difficult to get them to look as far into the future, but we certainly do look to the future. We do have—after all, planes on order which are going to be delivered in 2000, 2001, 2002. The carriers know now that they are going to expand their services. They may not know exactly how many flights per day in each city, but they've got a good indication. That's why the FAA Forecasting Conference is useful.

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    So carriers know that they need growth. They are planning for growth by acquiring the equipment, and they will step up to the task of financing—use that Anchorage project. That one is not going to be on-line until 2005, yet we are trying to get it done right now.

    Mr. DUNCAN. I know that as witnesses for your respective groups, you have to take pretty strong positions, but is there a compromise position here, or middle ground? Do any of you—would any of you like to comment on the recommendation by the Civil Aviation Commission that the PFC can be raised only where there is an agreement between the airports and the airlines?

    Mr. BARCLAY. Mr. Chairman, I'd like to say that there's more to it than that part of it. The Commission said two things. One, that as an interim step, you could solve some of the problems by saying that where you can get agreement between airports and airlines, you could increase PFCs, but it went on to say you are still going to have to, in the future, have a PFC increase of the current PFC even at a $2 billion AIP level. So they saw it as a two-stage process, and the in-agreement portion was sort of the first step they were describing.

    Mr. DUNCAN. What about some type of gradual increase in a PFC, 25 cents a year for a while. I know you said you want to double the PFCs, what's your position on something like that?

    Mr. BARCLAY. Well, I think actually our position is that we would like to remove the ceiling entirely on PFCs, but I think that a recognition of the need not only to increase the PFCs to deal with today's shortfall, but also to accommodate inflation and growth and demand is certainly something that we feel is very much in order. So that in combination with an overall increase—we have proposed, for example, an indexing of PFCs, to recognize the fact that there are inflationary demands and there are growth demands that a stationary PFC doesn't account for.
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    So, I think that all of those are discussions that are worth having, but I think that they can really only be had under the leadership of a group such as yourselves to create a structure which would give us a forum for having those kinds of discussions. Right now it doesn't really exist.

    Mr. DUNCAN. Mr. Merlis, you told Mr. LaHood that you wouldn't advocate lowering the current PFC. What about adjusting it for inflation?

    Mr. MERLIS. No, I don't think that's necessary. These projects are capital projects. When they enter into them, they are forecasting that they will be paying for them with devalued dollars for many, many years to come, just like when you buy a house and pay for it ten or 15 years after you've purchased the house, you're paying for it with a much less valuable dollar, and you are getting the benefit of it.

    I think that answers the issue of the inflation because these are capitalized projects, they are not being paid in cash year after year after year. $4 billion of the PFC that's been approved is interest.

    Mr. DUNCAN. All right. Well, thank you very much. I think this is—

    Mr. BARCLAY. I'm just wondering if Mr. Merlis would apply that same theory to airline capital costs as to airport capital costs.

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    Mr. MERLIS. Airline or airplane?

    Mr. BARCLAY. Either one.


    Mr. MERLIS. I think we should call Boeing and Air Bus in to answer that question.

    Mr. DUNCAN. Well, thank you very much. This has been a good hearing. Oh, excuse me. I'm sorry. I hadn't noticed Mr. Oberstar had come in. Mr. Oberstar.

    Mr. OBERSTAR. Thank you very much, Mr. Chairman. I've been listening very intently to your thoughtful line of questioning, and it's right on the mark and asked all the questions that need to be asked.

    I have, unfortunately, had to be in and out of this hearing, but I have read your testimony ahead. Just a little bit of perspective. In 1990, when then Ranking Member of the Aviation Subcommittee, Bill Clinger, and I as Chair, looked ahead—well, actually, December of 1989 we looked ahead to the future of the Airport Improvement Program. We decided that we needed to understand the universe of needs—not wish lists—in aviation, and convened a gathering of airlines, all of the carriers, airports, airport executives, the building and construction trades, the FAA, DOT, had a big confab right here in this room, took their ideas, commissioned them to come back and give us a report of the needs over the next 5 years of airport runway, taxi-way improvements, and to then review—which we did, we took that list and we reviewed it with GAO, Office of Management and Budget, scrubbed it down to a list of something in the range of $10 billion a year of needs over a 5-year period, just to upgrade runway and taxi-way requirements, to add further runways that were needed for capacity, and that was the year, you recall, in which O'Hare logged a milestone, 100,000 hours of delay in airport operations. And there were three other airports right behind them, closing in on 100,000 hours. Overall, the whole of aviation logged 7.5 million hours of delay nationwide because of inadequate runway capacity. Part of it was weather, part of it was air traffic control technology, but a large part of it was in the carriers, the passenger organizations, the business and travel partnership organizations, all were in accord that we needed additional funds.
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    We had money locked up in the Aviation Trust Fund, $7.5 billion surplus at the time. We needed to unlock the Trust Fund. We had the trigger mechanism that if you didn't put enough money into airport funding, then the FAA couldn't use money for operations.

    We worked out a very complex agreement with the FAA, the Bush White House, the Office of Management and Budget, the Appropriations Committee in the House, the airlines, the airports. Todd Hauptli was in the midst of all that—I see Todd sitting there in the audience—and we put this whole package together. Larry Barnett I see sitting over here actually chaired that group.

    We reached agreement on a formula to draw down the surplus in the Trust Fund, increase the appropriation, put more than 50 percent of O&M funding out of the Trust Fund itself, and to increase money into the Airport Improvement Program. And we resolved the issue of noise over the balance of the decade, to get the Stage III aircraft, to reduce the number of Stage II aircraft from 3,750 down to 600 by the end of the decade and zero in the year 2000. And we accomplished all of that in one package, and the Passenger Facility Charge (PFC).

    I was skeptical about the Passenger Facility Charge. Republicans were very much for it. The irony of the time was that this was a major Republican initiative. Today I see the philosophy has sort of shifted, Republicans are sort of skeptical about it—I mean, those on our Committee who need some education to understand the background of this whole thing.

    The objective of the PFC was to help airports increase capacity and also to deal with those needs that the carriers aren't too terribly concerned about, how you get from your parking lot to your gate, how you move within the terminal environment. Passengers want to get to the gate the most efficient way possible, want the terminal environment to be a more attractive and more welcoming environment. PFCs could be used for that, as could AIP funds.
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    So, when we concluded that whole legislative package, Secretary of Transportation Sam Skinner said it was the aviation bill of the half-century, and indeed it was. $4.5 billion have been raised in PFCs, a billion dollars a year.

    Now, 80 percent of the PFC proposals have been concurred in by airlines. The funding has been, I think, reasonably well distributed. PFCs have been used to extend 49 runways, to build 18 new runways, undertake gate expansions at 25 airports—and that was another key element, was to give airports the authority to build gates to attract competition at concentrated hubs, like the ones we have in my beloved Northwest Airlines system.

    In fact, mentioning Northwest, they started out opposing PFCs for every project. Now they come to the airport authority and say wouldn't you like to do a PFC for such-and-such like our World Club on the Gold Concourse, you know, we think what we have is not good and we'd like to build a new one, and you could use PFCs to help us do that. Wouldn't you like to move the Immigration Service and the Customs Service from the Humphrey Terminal over to the Main Terminal so we can better accommodate our 747 Pacific service better and our Atlantic service better at the Main Terminal, it would be a great idea, and you could use a PFC to do that. And they've done it, and it's worked.

    Now, I have not been completely satisfied that the airports have invested as much of the PFC into the airside of the airport as they should. And I think they took care of a lot of passenger- side needs that are important, that have to be addressed, that airlines weren't concerned about, but I think we've turned the corner on concentration on the groundside and seeing a movement back to the airside of investments.
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    And as for the cost of those PFCs, you know, if you buy a ticket from here to Minneapolis-St. Paul, it's $1,000 on my favorite beloved carrier—the only way I can get to Minneapolis-St. Paul, by the way, unless you are born there. If you assume a $12 PFC, it's less than 1 percent of that $1,000 ticket. Pull up to your favorite gas station, buy your favorite brand of gasoline, that's 18 cents on a $1.19 price per gallon. Percentage is huge compared to what you're paying for improved airport capacity.

    Now, my admonition to airports is, take a look at the runways. I would like to see—I've asked FAA to develop this information. The condition of runways at our 541 commercial airports, the average life of a runway is about 25 years, then it starts to collapse. How many 25-year-old runways do we have, and how much requirement is there to replace and rehabilitate those runways that were built where the subgrade was inadequate, the subbase was inadequate for today's heavier aircraft? I think there's a substantial need. We need to assess that need. We really have to take a careful look at what those requirements are for runway and taxi-way replacement.

    There are two ways to get more capacity in our system, improve air traffic control and improve runways and taxi-ways—excuse me, three ways—the third is bigger aircraft. You aren't going to build many more airports in this country, and so with larger airplanes, we need better airport infrastructure to accommodate them.

    There will, indeed, in response to the Chairman's questions, there will be fewer operations, or at least the leveling off of operations. I notice that at O'Hare, the number of operations is flat while the passengers are growing. That's just more international travel, bigger aircraft, more wide-bodies, and you carry more passengers per operation and more enplanements per operation, fewer or at least the same number of operations.
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    So, I really think that we need an additional dollar. I wouldn't lift the lid on, as ACI says, unlimited capacity. I think we need at least an additional dollar. I'd be willing to do more than that upon a showing that the needs have grown and what the costs are for runway and taxi-way, hard airside improvements. I think the system is working very well right now. The airlines are participant in and partners in decisionmaking, but don't have a veto on the PFC. I think more competitive gates should be built at our fortress hubs to attract competition, but there is more involved than building a gate and getting competition.

    Southwest is not going to fly into Minneapolis-St. Paul to challenge Northwest, where they have no collector system to mount a real competition to Northwest, but they sure have done it at Sacramento, and they have added capacity to Sacramento, enormous amount of growth at that airport, and so on.

    But the PFC really inflation has eroded, it's lost about 50 cents in buying power since the beginning. I think the PFC should be increased, and I think the case is there to be made, but beyond the dollar, I'm not sure just how much more than that, until I see a report from FAA and can evaluate it effectively.

    I thank all of you for your thoughtful contributions, and I will spare you questions. Thank you for listening to my homily.

    Mr. DUNCAN. Thank you very much. Mr. Lipinski, do you have anything you wish to add?

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    Mr. LIPINSKI. No.

    Mr. DUNCAN. Well, gentlemen, thank you. It's been a very informative hearing, and we appreciate your participation very much. Thank you very much. That will conclude this hearing.

    [Whereupon, at 12:02 p.m., the Subcommittee was adjourned.]

    [Insert here.]




U.S. House of Representatives,

Subcommittee on Aviation,

Committee on Transportation and Infrastructure,

Washington, DC.

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    The subcommittee met, pursuant to notice, at 10:01 a.m., in Room 2167, Rayburn House Office Building, Hon. John J. Duncan, Jr., (chairman of the subcommittee) presiding.

    Mr. DUNCAN. We will go ahead and call the subcommittee to order, and I want to, first, say good morning, and welcome to this morning's hearing.

    This is our second hearing in a series of four hearings. We have two more, one tomorrow, and one next Wednesday, where we will review a number of programs in order to prepare us for the FAA reauthorization legislation.

    We are very fortunate to have with us this morning, once again, the administrator of the FAA, Ms. Jane Garvey. I know that I have said this before, but I will say again, that I think Ms. Garvey has done a tremendous job since taking over the agency. It is a very, very difficult job, and I am not sure that everyone realizes how difficult it is to deal with a gigantic bureaucracy such as the FAA, but I hope that in some ways we can help Administrator Garvey and the FAA, and give the administrator and the FAA the tools that are necessary, that will not only make their difficult jobs easier but will also help in making needed changes that will move our aircraft and control system in a direction that will benefit the traveling public.

    We also are very pleased to have a very good friend and, really, an outstanding former Chairman of this committee, Congressman Norm Mineta. Congressman Mineta is not only well-respected, here, in the Congress, especially those who served with him and worked with him, but he is respected across this country.
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    He served as both the Chairman and the Ranking Member of the full committee during his tenure, and also spent a lot of time on this subcommittee, and was honored in many ways for that service, and has most recently served as Chairman of the National Civil Aviation Review Commission.

    We are pleased, Chairman Mineta, that you are here with us this morning, and we very much look forward to hearing from you.

    Also, a man whom I have described as one of the finest and most interesting witnesses that we have had in this committee, Mr. Phil Boyer, who is president of the Aircraft Owners and Pilots Association. He is here with us again and he has provided this subcommittee with outstanding testimony in the past, and I am certain that he will again.

    He does a very effective job in representing general aviation pilots from all parts of the Nation, here, in Washington.

    We are also very pleased to have with us Mr. Mike McNally from the National Air Traffic Controllers Association. Mr. Michael Fanfalone from the Professional Airways Systems Specialists. They were just with us a few days ago. And Ms. Gail Dunham, who is president of the National Air Disaster Alliance. We will certainly look forward to hearing from her, and I know several people associated with her, and they have provided great service for the country in some very tragic and difficult situations.

    So I want to thank all of you for taking time from your very busy schedules to be here with us this morning.
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    I know that several members of the subcommittee are very interested in a number of issues, including funding issues surrounding the FAA.

    The Full Committee, just last week, approved our views and estimates, which of course is a document given to the Budget Committee outlining our estimates for fiscal year 1999.

    The committee approved a proposed funding level for the FAA of $10.34 billion, which is $1.2 billion more than what was appropriated for this fiscal year, and I think last year was, I think, one of the biggest single increases, perhaps the biggest single increase in the history of the FAA, and we are about to do that again in authorizing $200 million over this fiscal year's authorization level.

    This is a very substantial increase and I think it sends a very clear message that we are trying to do everything we can to help the FAA.

    On the other hand, it is the responsibility of this subcommittee and our full committee to make sure that that money is not wasted and is spent wisely, and efficiently, and in a way that, as I mentioned earlier, will benefit the traveling public and will help keep our aviation system the safest and the best in the world.

    I believe, however, it would be fair to the traveling public, and best for the traveling public, if we took the Aviation Trust Fund off-budget and used the taxes collected for their intended purpose. The FAA is working on a cost allocation, cost accounting system that will help them in their efforts in developing a user fee based system. So we look forward to hearing from our witnesses today on this, and many other issues.
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    Our Ranking Member, my good friend, Mr. Lipinski, is not here because of the primaries that were held yesterday and last night in Illinois, and so I now yield to his very able substitute, my good friend, Mr. Boswell, for any opening statement he wishes to make.

    Mr. BOSWELL. Well, thank you, Chairman Duncan.

    Again, I appreciate what you have been doing here, and all of our interest in what goes on in aviation, and Ms. Garvey, I appreciate what you bring to the table, and I certainly concur with what John has said.

    I want to have a visit with you one of these days. I mentioned to you, the last time, that it is a matter that I think is important to both of us.

    But, you know, all of us in this room, probably, I would guess probably everybody here rides on airplanes. I was just coming out of Omaha the night before last, and somebody was making a comment about something, and one of the attendants there said, ''Well, you know, it is kind of like we used to be car travel, everybody—you know, we really depend on it,'' and so I am not only a passenger twice a week, but I own an airplane and I fly it. Yeah. As old as I am, I do, and I really appreciate it. And over the Christmas holidays I was flying into Boulder, going out from Iowa, and was on an instrument flight plan, and as we came into the Denver control area—you know, you listen to chatter, all the traffic going in, and a lot of traffic of course there as there is other places, and I just was reviewing—my wife was riding with me, my wife and the dog—and she said, ''A lot of stuff going on down there.''

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    And I said, ''Yeah, but we have got good people that are looking out for us.'' And we were in the clouds. As we say in aviation, when you are on instrument conditions, fully, it is kind of like flying through a milk bottle. You know, you really are counting on what is going on, and those are affecting the control. Extremely important. We all know that, and we understand it. We appreciate it, and it is going to be more and more demanding as time goes on. It is not going to let up.

    So I think that this is extremely important, what goes on here, and I cannot stay the whole morning, we have got an agricultural marketing discussion going on, and I am on that subcommittee also, and coming from a farm State, I am going to slip away. But I promise you, I will read the stuff from this morning, and appreciate you all being here.

    You first panelists, of course my friend, Phil Boyer from the Aircraft Owners and Pilots Association, and the Traffic Controllers, and Airways Systems Specialists, National Air Disaster Alliance and Foundation—very, very important folks. And so we have got a good thing happening here. Thank you, Mr. Chairman. Appreciate it.

    Mr. DUNCAN. Well, thank you, Mr. Boswell.

    Mr. Oberstar.

    Mr. OBERSTAR. Thank you, Mr. Chairman.

    It is very timely to again convene our committee on the subject of modernization, airport improvement program advances, to revisit the whole reauthorization issues surrounding the FAA.
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    We meet again on this very important subject, and I congratulate you, Mr. Chairman, and our Ranking Member, Mr. Lipinski, on getting an early start, moving the committee ahead on the very complex but pressing and fundamentally important issues that we must address.

    It seems like yesterday, but it was 2 years ago, that we gathered on reauthorization of FAA programs, and I join you in welcoming Administrator Garvey, who has done a superb job in the short time that she has been at the helm of the FAA, in taking charge and laying hands-on, down to the smallest detail of operation, and personnel in this agency, and that is really what it needs.

    It needs the kind of management expertise that you have brought to this agency, and I am really impressed with the performance that you have demonstrated.

    And we welcome Mr. Mineta, my long-time partner and colleague. We came to Congress in 1974 together. He was president of our class, and got the luck of the draw, and got seat ahead of me on this committee.

    I still remember our opening day of the first session of the Committee on Public Works, and Bob Jones, up there in the portrait on the back wall, was Chairman. He gave each one of us new Members an introduction, and gave us 1 minute to say something.

    And I just, way down there on the farthest end—we did not have all these extra desks at the time, Mr. Chairman—and I looked out, I said, ''Well, Mr. Chairman, it is a delight to be here, I am happy to be on this committee, but it is very different from when I had real power as administrator of a committee staff.''
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    Mr. OBERSTAR. And Norm Mineta, as he did as mayor, distinguished himself as chair of four of the subcommittees of this full committee, and then as chair of the full committee, and likes being Chairman. He came back to chair the National Civil Aviation Review Commission, and with the support of David Traynham of our committee staff, and Donna McLean of the Republican staff, did a superb job.

    You know, it is spread out here like Easter eggs, as we approach that season, before everyone's desk, that it will be read, more importantly, that it will be implemented.

    Because many of the issues that we discussed 2 years ago in these reauthorization hearings are addressed in substantial detail, and with authority in this document.

    The commission did a superb job. I think commission members learned a great deal. They became a team as they went through the process, and under your skilful guidance avoided some pitfalls, but more importantly, offered a view of the future, and confronted without pulling any punches, the fundamental issues that we must address, principally those of funding, but also profound issues that repeat themselves in aviation.

    I was very pleased to hear the Chairman talk about taking trust fund off-budget. The last serious attempt was under Mr. Mineta's leadership on the House floor. We came within five votes of trust fund off-budget. That was an historic moment. It remains the objective of Chairman Shuster, and myself, to take both the Highway Trust Fund and the Aviation Trust Fund, as well as the Waterway and Harbor Improvement Trust Funds, off-budget, as they were intended to be, originally.
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    But the current budget atmosphere is, let us say, not conducive to that effort. But it must be our persistent initiative.

    There was a debate last year on funding, but it was conducted in the wrong committee, in the Committee on Ways and Means, on the best and the fairest way to finance the FAA.

    It wound up being not a debate on the issues, but a debate between the airlines, or among the airlines, and, in the end, did more harm than good to those who engaged in that debate.

    The result of last year's initiative in that committee was a financing system in which airlines and passengers are paying more into the Aviation Trust Fund than they did prior to that debate, prior to the enactment of that legislation, and the FAA still will not receive one dime more than it did before the debate began, before the taxes were enacted.

    That does not serve the overall best interest of aviation. It may have served the parochial purpose of a few carriers who wanted to—let me be very blunt—stick it to one or another of their competitors. But it was not a victory for competition, it was not a victory for passengers, it was not a victory for sustained funding of the needs of the air traffic control system or improvements in airport modernization.

    We will get to that point of a fair system when we know what it costs the FAA to operate its system. I think the report of the commission provides a great service to our committee, to the public, to the FAA, by highlighting this issue, that FAA still does not know, cannot accurately, or even adequately, assess costs to users of various services provided.
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    Under Administrator Garvey's leadership, they are moving in that direction, but it is a move that has not been successful in the past, not really been effectively undertaken in the past, and I think with the push of the commission report, we may be able to move to a cost-based funding system for the FAA that will help us take the trust fund off-budget.

    Once we have done that, I think we will, Mr. Chairman, be able to meet the test of the Office of Management and Budget which says that a fee must be directly and reasonably related to the costs of the service for which the fee is assessed.

    If we can assess the costs of FAA in each of the service categories that it provides, with the exception of safety, I think we will have the basis for trust fund off-budget.

    And unless we see funding for AIP well above $2 billion, annually, we are going to have continued pressure for increases in passenger facility charge, and continued delay in meeting the adequacy needs of our air side capacity.

    Just yesterday afternoon, it happened, by chance, that I saw my partner for many years, and colleague on this committee, Mr. Clinger, on the subway, and we reminisced for quite some time about our landmark legislation of 1990, when we swept away a lot of bad thinking, and old practices, and moved ahead with an agreement to increase funding over a period of years to meet the assessment of $10 billion a year in investment in air side capacity and runway, taxiway, parking apron requirements.

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    Fortunately, for 3 years that worked. Unfortunately, the deficit and needs of other programs in the Federal budget overtook the success that we achieved.

    I continue to be deeply concerned about the condition of the Nation's runways.

    I think there is a substantial number of the 514, or 540 commercial airports in this country whose runways are more than 25 years of age, and that is the age at which runways start to precipitously deteriorate and crack. We cannot have that happening. There is not, to my knowledge, an accurate airport by airport, runway by runway assessment of the age and condition of the Nation's hard side, air side requirements and looming needs. That needs to be undertaken.

    I have urged airports to do it. I am disappointed that they have not done it.

    This is also a critical time in the modernization of the FAA. Of the 58,000 pieces of technology encompassed within the AAS modernization program, 47,000, or 48,000, now, have been installed. That is a remarkable accomplishment. FAA does not get credit for having done that.

    All we hear about is this silly little vacuum tube issue. Every time one of our leading officials in Government, whether it is—well, let us not name offices because that is like naming names—has a photo op, they haul out this little vacuum tube, and say, ''This is why the FAA is not working.''
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    Well, that is so silly. If they only knew that about 1 percent of our technology in aviation operates on vacuum tubes, and as one controller said, ''Thank God, because they work and some of this other stuff does not'', you know, I get exasperated.

    FAA does not get credit for the installation of the VCS, almost 2 years ago now, overnight, over one weekend, a billion dollar system with a million lines of computer software code, without shutting down the air traffic control system for one minute.

    When Oldsmobile changed over from its Sierra line to a new line, they shut down the production system for three weeks. What FAA did is the equivalent to changing a tire on a car moving 60 miles an hour. It deserves credit for the good things that it is doing.

    I think many of the problems in the modernization program have been corralled. I think we have a tracking system, we have a waterfall that can track. The target dates for completion of various aspects of each one of the complex modernization systems. That is a big job, far bigger than anyone estimated in 1981 when the idea was born to modernize and in 1983, when the initiative was launched, it is a $32 billion modernization program.

    And I think that it is on track, with a lot of problems, but it is on track, and you deserve credit for what you have accomplished in moving it ahead.

    These hearings, and the framework of the legislation that the committee will craft, will be the framework that takes FAA across that magic threshold into the next century, and the threshold of the next millennium.
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    The agency is in good hands to make that move, and the commission report is a good platform on which to stand, and this committee's shoulders, and your leadership, Mr. Chairman, a good vantage point from which to view that future. Thank you.

    Mr. DUNCAN. Well, thank you very much, Mr. Oberstar.

    Mr. Lipinski and I always refer to Mr. Oberstar as Mr. Aviation, and we are very fortunate to have on this subcommittee your interest, your involvement, your participation, but especially your leadership on these issues, and I thank you.

    I always learn from Mr. Oberstar. Mr. Traficant.

    Mr. TRAFICANT. Thank you, Chairman, and thank you for holding this hearing, and I want to concur with your statement about Mr. Aviation.

    I would like to welcome Norm Mineta here, first, a colleague, and I think your work on the commission was tremendous, and I think the Nation would be wise to adopt some of your recommendations.

    I think you did a great job, Norm, and it is good to see you back, Chairman. I wish you were still Chairman.

    I would also like to say to——

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    Mr. TRAFICANT. Well, no offense. Jimmy Duncan is a great Chairman, but, you know, it is no walk in the park up here. But anyway, to the administrator, we are trying to support you and we know that you are out there and you have a tough job, and some of these things are a real tough situation to deal with, and we will try and help you.

    One of my major concerns—I am not going to speak very long here—is just I am concerned about enhanced vision technologies.

    I cannot believe the fact that some of our new technologies that are so effective are not even on the radar list of the FAA, and our aviation world.

    I just want to read, Mr. Chairman, one brief sentence. Mr. Chairman, it deals with this Korean Air Flight 801, and it says, ''The plane being flown by autopilot was descending steeply. The crew talked about the altitude and someone said several times that the airport is, quote, unquote, not in sight; not in sight.''

    But their sources say that no one really challenged the captain. They do not know if it was over attitudinal and cultural issues. But the airport was not in sight.

    And we have had so many inclement weather safety type related disasters, that keep saying that these planes are not touching down in a safe manner, and I cannot believe we are not moving on with enhanced vision technologies, and Mr. Chairman, with that, I am going to say this. I bring legislation and offer an amendment to this authorization bill that will move forward the technologies for enhanced vision types of instruments, and with that, I thank you for the time.
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    Mr. DUNCAN. All right. Thank you very much.

    Mr. Metcalf.

    All right. Mr. Defazio.

    Mr. DEFAZIO. Thank you, Mr. Chairman.

    Mr. Chairman, I sat through quite a number of hearings chaired by Ranking Member Lipinski, who is not here today, but my understanding is that we are finally reaching fruition on a proposal on what we see as an equitable funding method for the future needs of our aviation transport system in the FAA, and if Ranking Member Lipinski were here today—I am sure he is on his way right now—he would be able to wax much more eloquent about it than I.

    But we will certainly refer to the attention of the Chairman and would hope to have some bipartisan support. We feel very strongly, that we have to wrest this issue back from the people on Ways and Means Committee who do not fully understand the implications of what they are doing, or attempting to do, and this is a very serious issue.

    We need to meet adequately, and robustly, the future aviation needs of the United States, if we are going to continue to have a vital sector that is not plagued by delays and safety problems.

    Thank you, Mr. Chairman.
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    Mr. DUNCAN. Thank you, Mr. DeFazio.

    Ms. Johnson.

    Ms. JOHNSON. Thank you, Mr. Chairman, and thank you for holding this hearing. I want to greet our witnesses and say that Mr. Mineta was the person who welcomed me to the Transportation Committee, and was our leader, and it is great to see you. I look forward to the testimony. Thank you.

    Mr. DUNCAN. Thank you very much.

    Mr. Pease.

    Mr. PEASE. Mr. Chairman, I have no opening statement. I do appreciate, very much, the presence of these two folks, both of whom have been helpful to my staff and me, personally. I look forward to their testimony.

    Mr. DUNCAN. Thank you very much.

    Ms. Brown.

    Ms. BROWN. Thank you, Mr. Chairman.

    I would like to welcome Administrator Garvey, in particular, Mr. Mineta, who I miss a great deal—his friendship, his support, and his guidance, and I am looking forward to the testimony, and I would to just enter my opening statement for the record.
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    Mr. DUNCAN. That will be fine and that statement will be made a part of the record.

    [The prepared statements of Ms. Brown and Mr. Costello follow:]

    [Insert here.]

    Mr. DUNCAN. All right. At this time we will go ahead with the first panel and as I have already stated, we are very pleased and honored to have with us the Honorable Jane Garvey, who is the administrator for the Federal Aviation Administration, and the Honorable Norman Y. Mineta, who is the chair of the National Civil Aviation Review Commission.

    Administrator Garvey, you may proceed with your testimony. Thank you very much.


    Ms. GARVEY. Well, thank you very much, Mr. Chairman, and Members of the Subcommittee.

    I welcome the opportunity to be here before you today, and I do want to say it is a particularly singular honor for me to be appearing with Chairman Mineta.
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    Like all of you, I have deep respect and great affection for him and the work that he has done for all of us.

    I would like this morning, if I could, to summarize my testimony and to submit my formal statement for the record.

    Let me begin by saying that, in a sense, I know that this hearing is part of a discussion that is really critically important to the traveling public. It is critically important to the American economy, and as we begin this process, I believe we share some key objectives that should really serve as a touchstone for our decisions.

    First and foremost, as this Committee has so often reminded us, our first mission is to promote aviation safety. Second, to ensure that our air traffic control system can meet the demands of a growing industry, and can meet them safely and efficiently.

    Third, to improve the performance of the FAA, and finally, to make sufficient capital investment in our Nation's airports.

    These objectives are challenging ones. They are challenging both for industry and they are challenging to Government as well. I believe that the two pieces of legislation, which will soon be submitted to Congress by the Administration, will serve as a valuable starting point, as a platform, as Congressman Oberstar said, for our efforts.

    Our legislative proposals, one to reauthorize the FAA programs, and the other, to implement many of the National Civil Aviation Review Commission's recommendations, are really directed towards those four goals.
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    They are directed toward strengthening capital investment in airports, and the air traffic control system. They are directed towards improving our performance and increasing our responsiveness to customer needs.

    Our reauthorization proposal reflects the Administration's strong commitment to investment in our Nation's airports. We will propose an airport improvement program authorized at $1.7 billion, annually, over the next 4 years.

    We are also looking at, and discussing within the Administration, other financing options such as a consensual approach to PFCs, in an effort to provide airports with even more tools, more flexibility to increase capital investment.

    Capital investment in our Nation's air traffic control system is also critical. We are proposing a $2.1 billion funding level in FY 1999 for our Facilities and Equipment account. $100 million is included in this request to continue to carry out the White House Commission on Safety and Security's recommendations to deploy critically necessary security equipment at our Nation's airports.

    We are also requesting funding from our Research and Development account for Flight 2000, to provide real-world operational tests of advanced technologies.

    Finally, we are proposing an authorization level of $5.6 billion for FAA Operations to allow us to hire the additional air traffic controllers, the maintenance technicians, and the safety and certification personnel needed.
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    In addition, we believe this funding level will provide the needed resources to support those safety initiatives that show the greatest promise for preventing aviation accidents.

    Along with reauthorization of these important FAA programs this year, we also have an opportunity, we believe, to build on the success of the recent personnel and acquisition reforms at the FAA. The NCARC, chaired, as we have said, by former Congressman Norm Mineta, ably fulfilled its mandate. And we really want to underscore that. I think they did a wonderful service and provided, I think, really great leadership to all of us.

    They not only accurately diagnosed the challenges facing the aviation system but they also gave us some very specific recommendations to change the status quo.

    The Administration supports the fundamental management and financing recommendations that are outlined by NCARC. We believe that the operation of the air traffic control system is a unique Government function.

    We provide air traffic control services to an industry that needs these services 24 hours a day, 365 days a year. A failure to keep up with technological change, a failure to make the critical investments, has a direct, bottom-line impact.

    It has an impact on industry and it has an impact on the traveling public. We really need to improve our ability to identify the cost of our services, to find out what it is our customers need, and to respond creatively and rapidly to those needs.
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    NCARC reported that the FAA cannot make these improvements without fundamental management and financial changes. Without change, the economic efficiency of the aviation system will decline, perhaps dramatically.

    I think all of us have heard the testimony from aviation experts, which indicate that our system could be headed for, at best, delay and cost increases, and at worst, aviation gridlock.

    We think it is important to move on the recommendations of NCARC. The Administration supports the creation of a Performance Based Organization or a PBO for air traffic services within the FAA, to bring the proper focus on services, and to provide the kind of incentives that we need for increased performance.

    In addition, user fees based on reliable and accurate cost to support much of the operation of the PBO will help provide the PBO with the budgetary flexibility, the planning capability and the financial resources necessary to meet the challenges of a dynamic, growing industry. We believe that any fees should go directly to the PBO for expenditures, ensuring that aviation resources raised are spent for aviation purposes, and allowing the FAA to move easily to meet the needs of our users.

    Mr. Chairman, we are moving along the path of reform. We are putting in place a cost accounting system that will enable our managers to better control operating costs, and ensure that any user fee put in place is based on reliable and on accurate costs.

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    We think the proposals that we are talking about today will further enhance the effectiveness of those reforms, and help us to meet the challenges laid out in the report of the National Civil Aviation Review Commission. Let me just say, in closing, Mr. Chairman, that I know I speak for the Secretary, when I say that we very much appreciate the support, the leadership that has been provided by this Committee and by you, in particular.

    We know that these challenges are difficult ones, the issues are not easy, but we look forward to discussing this with you and with Members of the Committee, and also with the aviation industry as well. Thank you very much.

    Mr. DUNCAN. Well, thank you very much.

    Chairman Mineta.

    Mr. MINETA. Thank you very much, Mr. Chairman, and Members of the subcommittee.

    It is really a pleasure for me to have this opportunity to be with you this morning, especially in the company of my very good friend, Jane Garvey, whom all of us know to be a wonderful administrator of the FAA, but who we knew did a wonderful job at the Federal Highway Administration before this.

    As you are aware, I had for the last year the honor serving as chair of the National Civil Aviation Review Commission. Authorized by the Congress in 1996, the commission was charged with examining the state of the Nation's civil aviation programs, and with developing recommendations about the future financing operations, and the safety of the civil aviation system.
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    Equally importantly, the commission was charged with developing a consensus approach, drawing on expertise from both inside and outside the aviation industry, and I believe, very strongly, that our report does reflect a consensus, and that it constitutes a package of recommendations to be enacted.

    In fact two of the reasons for that success are here with us this morning. Two members of the staff of this subcommittee who were detailed to the commission, Donna McLean from the majority side, and David Traynham from the minority side. Mr. Chairman, we appreciate very much your having released them and detailed to our commission. Both Donna and David worked tirelessly to support the commission's work and to produce a report of which I believe all of us can be proud.

    I am also proud of the fact that the commission was able to complete this job on time, and considerably under budget.

    I am pleased to say that although the final accounts are still being settled, it appears that we will be able to return a substantial portion of our appropriation to the U.S. Treasury, well over $900,000.

    There was a typographical area in my submitted testimony, Mr. Chairman, indicating that some $500,000 would be returned. However, the $900,000 is the correct figure.

    The report filed by the commission in December of this last year, and which was adopted, unanimously, represents a realistic and comprehensive program of changes to move aviation forward into the 21st Century.
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    Current projections are that the aviation industry will grow by over 70 percent over the course of the next 12 years, but without major changes in commission policy, that growth rate simply will not be supported. To meet that challenge, the commission's report zeroed in on several areas of concern.

    First of all, the need for improved organizational, financial and management resources at the FAA, combined with the need to become much more customer-related. There is a very real danger that the United States could lose its historic position on the cutting edge of commission technology and air traffic management worldwide, and a currently inadequate revenue stream for aviation operations and capital investments.

    Now, without change to the current system, the commission believes that every airline passenger will feel the effects of gridlock in our national aviation system. In response, the commission's report recommends five broad changes in the management and the financing of our national air traffic and airport development systems.

    First, we recommend that the revenues paid by aviation users be dedicated to aviation services, and that these programs be shielded from the overall discretionary budget caps, and that revenues and spending be linked.

    Secondly, we believe the FAA must adopt a cost accounting system and a customer-focused management structure embodied in a Performance Based Organization, a PBO managed by a chief operating officer, and overseen by a board of public interest directors.

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    Thirdly, the FAA should adopt a cost-based revenue stream to support its air traffic control system activities and required capital investments.

    Now, at the very same time, the commission's report recognizes the need to continue the fuel-based financing of services to general aviation, not user fees but fuel-based services to general aviation, and that those fuel revenues must receive the same special budget treatment as other aviation resources.

    Just like any inquisitive commission, we had a number of alternatives before us, and we examined them all, but we also recognized that general aviation plays a very special part in the field of aviation. So although we talk about cost accounting, though we talked about user fees, when it came to general aviation we said stay with fuel-based taxes, and even though we had all kinds of scenarios about increasing the fuel taxes, in the report we said do not increase the fuel taxes.

    And after all the deliberations that we had with the general aviation field, we did the two things they asked us to do: not to move to a user fee system, stay with fuel tax base, and do not raise the taxes on us.

    Fourthly, the FAA must control its operating costs and increase capital investment, and fifthly, the commission found that the Federal requirements of airport capital development currently exceed the amount of revenues available.

    The Airport Improvement Program, the AIP, is the linchpin of airport financial planning, and the commission's report believes that the AIP should be funded at a minimum of $2 billion, annually, over the next 5 years.
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    In addition to the issues of day to day management and financing of aviation systems, the commission was also charged with examining the issue of aviation safety.

    There is no doubt whatsoever that commercial aviation today is a very safe form of transportation. The risk of dying in a commercial aircraft accident is about 1 in every 2 billion flights.

    That is extraordinarily low, but, unfortunately, that accident rate has shown virtually no improvement in the past 30 years.

    With the extraordinary growth that is expected in commercial aviation over the next 12 years, a static safety record is not acceptable. Without further improvement we can expect six or seven catastrophic accidents a year in the United States.

    Worldwide, we could expect one large airliner accident per week. That is clearly unacceptable and the commission believes it to be totally unnecessary.

    Safety professionals in industry and Government believe that an 80 percent reduction in the accident rate over the next 10 years is an achievable goal, a level which the White House Commission on Safety and Security also endorsed, and with which our commission fully agrees.

    Now to reach that goal, the commission report makes four recommendations for aviation safety programs.
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    First, the development by Government and industry of a strategic plan for safety improvements.

    Secondly, the establishment of risk management programs in both industry and in Government, including self-audits and self-disclosure programs sharing information in a non-punitive way.

    Thirdly, the FAA safety programs must become performance-oriented, with the agency's safety management being held accountable for improvements.

    Fourthly, both the United States Government and United States industry must expand their programs to improve aviation safety in other parts of the world.

    There is no doubt that we are at a critical time in the history of aviation in the United States and the world, and that we are faced with tremendous challenges. I believe that the commission's report can provide a blueprint for addressing those challenges.

    Mr. Chairman, the commission's recommendations are tightly interconnected and I believe they must be seen as inseparable components of a comprehensive package.

    The individual elements of this proposal cannot be set aside without destroying the consensus that the commission report represents. As a former Chairman of this subcommittee, I know how difficult the task of building a consensus on aviation policy can be.

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    I believe that the commission's report represents the kind of consensus that is needed to move us forward, and I urge both the administration and the Congress to accept these recommendations.

    I believe that through the steps recommended in the National Civil Aviation Review Commission's report, that the United States can challenge our aviation industry to continue to be the world's best and the world's safest.

    So I look forward to continuing to work with all of you, with Administrator Garvey and the FAA, to bring about that result.

    Mr. Chairman, the last time I looked, one of our commissioners, Mr. Barclay is also present, and I am not sure if any of the other commissioners might be here as well, but I would like to also introduce Commissioner Chip Barclay of the National Civil Aviation Review Commission.

    Thank you very much, Mr. Chairman.

    Mr. DUNCAN. Well, thank you, Chairman Mineta, and certainly, you have put out an outstanding report, and hopefully we can work together to bring some of these recommendations about, and I certainly want to commend you for returning the $900,000. That is almost unheard of, and that is a tremendous accomplishment.

    But let me ask you this. As you were going through your testimony a few moments ago, the thing that you seem to emphasize the most was that you are recommending, I guess, basically, as I understand, a user fee system of some type for everyone in aviation, except for general aviation, and general aviation would still be financed by a fuel-based tax system.
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    You know that general aviation has been very concerned about any type of user fee system, and apparently many within the general aviation community still feel that even if they were left out of a user fee system, that they might in some way become second class citizens within aviation.

    How would you respond to these concerns from the general aviation community? Do you think they should be concerned by your recommendation?

    Mr. MINETA. Well, Mr. Chairman, we feel that they should not be concerned by the recommendations made by the commission. We spent a great deal of time deliberating the whole issue of the necessity for a cost accounting system within the FAA, and to translate that into user fees for all parts of the aviation industry, except for general aviation.

    The other part that we excluded for safety, security, public use, and military, was a portion that we felt should come from the general budget in support of those four issues of safety, security, public use and military, because that was a general public benefit.

    But the portion we did focus in on, and we deliberated this, and we had a number of different alternatives being provided to us, including a tripling of the fuel taxes, but we rejected all of that, and we said general aviation is of special benefit to the aviation field, and we feel that we ought to stay with a fuel-based tax for general aviation, and that we ought not to increase the tax.

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    That was very clearly laid out in the report, and should they be concerned? Well, that concern is really up to the Congress, and so to the extent that Congress I think has always recognized the benefit of general aviation to the aviation field, and I think has always been understanding of that point, and I would assume that Congress will stay in that, quote, protective mode.

    But again, I feel that we were unequivocal in our stance on the commission about saying yes, there ought to be a cost accounting system, there ought to be a user fee, and we even went I think and said, even though the revenues coming in from general aviation do not cover all of the costs that are attributable to them, that we said stay with fuel-based taxes on general aviation and do not increase it.

    Mr. DUNCAN. Well, thank you. In addition to the discussion or the debate about user fees as opposed to fuel taxes, and so forth, another big topic of discussion is one that we had in here last week, and that is the discussion about passenger facility charges.

    Ms. Garvey, what is the administration's position about passenger facility charges at this point?

    Ms. GARVEY. Well, at this point, Mr. Chairman, of course we are still discussing it within the Administration, but one of the options we are considering very seriously is whether a consensual raise of the PFCs might be one flexible tool that we could offer to airports.

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    We know that there is a lot of discussion within the community about PFCs and we know there is a lot of discussion about whether or not they should be raised. The Commission did recommend raising the PFCs and we are looking at if there were a consensual agreement between an airport and the airlines, that that would be a possibility.

    Mr. DUNCAN. Chairman Mineta, any comment on the PFCs?

    Mr. MINETA. Mr. Chairman, we said that the minimum that should be appropriated for the Airport Improvement Program should be $2 billion per year for the next 5 years, and to the extent that that does not occur, then the Congress ought to consider lifting the cap.

    Mr. DUNCAN. Ms. Garvey, what do you think about this recommendation on the air traffic control being made into a Performance Based Organization? Do you understand specifically what the commission is talking about, or would you like Chairman Mineta to go into that a little bit more in detail, and then what do you think about that?

    Ms. GARVEY. Mr. Chairman, we have actually had an opportunity to meet with the Commission and with the Chairman in quite a bit of detail on this.

    We are very supportive of that principle, the idea of a Performance Based Organization within the FAA, and we think that is an important part of this.

    Mr. DUNCAN. Well, what I am getting at—and I am sure that both of you understand this, but I am not sure that I do—and what I am talking about is, in plain language, what difference would this make?
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    What would be the changes that would be made, or what would be the differences between the way the FAA operates now? I am sure some people in FAA would say it is already a Performance Based Organization. But what would you have to change? What would we be doing, differently?

    Ms. GARVEY. I think that the most fundamental difference is the financial flexibility that the Commission suggests. In other words, if you have a PBO with a user fee that has special budget treatment, it gives you that kind of financing flexibility that provides a stable funding source. I think that is the most fundamental difference.

    The idea of establishing performance measures is something that we can do, and we are obviously moving towards. But we think one of the most attractive features of the PBO is the financing flexibility that it would offer.

    Mr. Mineta may have other points.

    Mr. MINETA. Mr. Chairman, as the administrator has indicated, what we have talked about is to make sure that there are objective, data-based, analytical analyses of work objectives, and that those be translated, then, into performance bases, so that you then have an objective measurement as to whether or not the agency has accomplished those objectives.

    That the personnel would be rated on whether or not they have met those objectives, and we feel that this is a very important element of air traffic control services within, as the administrator has indicated, within the FAA.
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    There have been other proposals to form a Government corporation, or to make the air traffic control services an independent body of its own, but we feel that the FAA, in terms of all their responsibilities of air traffic control, regulatory, certification, et cetera, that it ought to be kept within the umbrella of the FAA, that there be this Performance Based Organization for air traffic control services, that it have its own board of directors, chaired by the administrator of the FAA, and the board of directors would then appoint a chief operating officer, and that that organization would be a Performance Based Organization in which you would have objective data on which to be able to measure performance of that body.

    Mr. DUNCAN. I remember, I guess actually it was the second hearing that we had shortly after I became Chairman, and we had three days of hearings on a proposal to set up an air traffic control corporation, and at that time there was just total opposition.

    So I just was wondering, and then, of course, you mentioned that just now.

    My time has run out but I have some more questions, but let me ask you, Ms. Garvey, one very brief question.

    The general aviation community is very much interested in FAA issuing a policy concerning a data link for essential weather information.

    Do you know if you are close to doing that?
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    Ms. GARVEY. Mr. Chairman, we are very close to doing it. We have one issue left to work on, and we expect to issue the policy by May 1st, and I think it will be a good, positive policy.

    I think it is going to be very well-received by general aviation.

    Mr. DUNCAN. Well, what is the one issue? Is it a major type problem?

    Ms. GARVEY. Actually, I do not believe it is a major type problem and I have been told that we are very close to resolution. In fact I think it is going to be pretty close to what the community has asked for. So we have had some good discussions, and will issue the policy May 1st.

    Mr. DUNCAN. All right. Thank you very much.

    Ms. GARVEY. Thank you, Mr. Chairman.

    Mr. DUNCAN. Mr. Oberstar.

    Mr. OBERSTAR. Thank you, Mr. Chairman.

    Again I thank the witnesses for being with us this morning, and for the combined expertise that they bring to this subject matter. It will be of great benefit to the committee.
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    Administrator Garvey, does the FAA have underway, now, a runway pavement assessment project?

    Ms. GARVEY. Congressman, we do have an assessment of pavements, but we were talking about this, recently, and I think there is more we can do in that area, and I think there is methodology that is available that would give us even more accurate information.

    So I think your point is well-taken. I think there is more we need to do in that area.

    Mr. OBERSTAR. Can you bring the Transportation Research Board into this initiative?

    They have studied it for many years in the past.

    Ms. GARVEY. I think that is an excellent idea, and some of the sort of pavement management programs that are in place on the surface side may, in fact, offer some models or some examples for us to look to, but I think the TRB is a very good suggestion.

    Mr. OBERSTAR. Well, I think it would be very important, very beneficial to the committee's work in reauthorization, and making the case for an increase in AIP funding, to have that information in-hand, before we report a bill from committee, because after all, the basis is need, and need goes to a couple of issues.

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    One is pavement quality and condition, and the other is adequacy of runways, and adequate separation of runways. There are many airports in this country, commercial airports, where the parallel runways are too close to each other to have parallel operations in worst weather conditions, regardless of the technology improvements. You can have terminal Doppler weather radar, ASDE, and ASR–9s and precision runway monitoring, but if your runways are 1,500 feet apart, you are constrained to use one runway in the worst weather and that slows all air traffic down.

    Ms. GARVEY. Thank you.

    Mr. OBERSTAR. So those issues really are long overdue for accurate and timely reporting for our committee.

    A second question is the issue that the commission raised, that we have raised on the committee for several years, and I think that your predecessors have grappled with to some extent, and that is evaluating, accurately, the costs of FAA services to the service themselves, and assessing the benefits of those services in order to come to a cost-based FAA system, that we could then translate the cost into a fee and take the whole system off-budget, and assure a dedicated revenue stream.

    Is the FAA making progress on developing an accounting system to identify a large-enough percentage of your user costs to establish an effective fee system?

    Ms. GARVEY. Congressman, I believe we are making very good progress. We have an aggressive schedule—and I want to underscore that—we have a very aggressive schedule. We have got a strong business partner in Arthur Andersen, who are working with us. We have focused primarily on the air traffic control area because that is where the services are most apparent.
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    Our goal is to have in place, by September 30th, the capability to collect the data. We are working closely with the IG and I will tell you that the IG's Office has raised some question, as we have questions ourselves, about the accuracy of some of the data. So we want to test that. After September 30th, we will have a system in place to collect the data.

    We want to take a series of months to make sure that we have accurate data, so that our cost accounting system is really based on the most up-to-date and accurate information. But I think we are making good progress, and we are, by the way, very happy to report back to the Committee, periodically, on how that is going, and perhaps a more in-depth briefing for you.

    Mr. OBERSTAR. Well, we do not need to consume committee hearing time for that, but briefings would be very beneficial, and I am anxiously looking forward to progress.

    Chairman Mineta, the commission assessed this issue. Can you subscribe to what the administrator just said?

    Mr. MINETA. What we did was to look at the FAA's forecast budget, and our concern about the forecast budget was that it really dealt with the future from a status quo perspective, and that is why we were talking about in terms of trying to quantify it, saying at least a minimum of $2 billion per year.

    But there are so many aspects of what makes up that total, including things like runway improvements that had to be made. But that is why we called for a minimum $2 billion per year for the next 5 years, under the AIP program.
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    Mr. OBERSTAR. Thank you. Just a couple quick questions. Chairman Shuster and I have written to you, Administrator Garvey, on at least two occasions, about the flight information services policy.

    It has still not appeared, and for want of such a policy there are some problems facing general aviation manufacturers, a community who want to proceed with more advanced technology aircraft, but it is useless to put that technology on board aircraft if the policy is not issued and airports cannot accommodate that technology.

    Ms. GARVEY. Congressman, we will have the policy out by the 1st of May, and we are working very closely with industry. In fact, I talked with a couple of members, right before the hearing started. There is one issue that we want to resolve with them, but we will have that in place by May 1st, and I know the concern and appreciate your mentioning that.

    Mr. OBERSTAR. Well, that is good news. You must have suspected that question was forthcoming. A final question. This committee authorized establishment, and it was the Chairman's initiative, of a Management Advisory Council. It is 18 months. I know it is a hard time getting commissions appointed, and getting names, and going through all the reviews. I know it is a big headache for any commission, but this one is 18 months, and it is not your doing, I know it is the White House's task to do this, and they have got lots of things to be worried about over there.


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    Mr. OBERSTAR. But have you heard any soundings, any drum beats, any rumblings through the rails? You know, we listen to the rails, occasionally, and hear where the trains are coming. Is anything happening?

    Ms. GARVEY. Well, they are actually reviewing a list of names, Congressman, and some wonderful people have been nominated by Members of Congress and from the industry as well, and I think one of the challenges is that some of the folks have very complicated financial backgrounds, and so forth, and so I think going through all of those is taking a little more time.

    But I do apologize. I know we are late in it. I am looking forward to having the Advisory Committee. I will say that industry, to date, has been extraordinarily generous in time with me, and I do appreciate that, but I think the Advisory Committee will give us an opportunity to have something more formalized and institutionalized, and I look forward to that, and I think we will see some very good names, and appreciate the nominations we have received from Congress as well. Very good folks.

    Mr. OBERSTAR. Well, thank you very much. Mr. Chairman, I have other questions I will submit for the record.

    Mr. DUNCAN. Thank you, Mr. Oberstar.

    Mr. Pease.

    Mr. PEASE. Thank you, Mr. Chairman.
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    Mr. Mineta, I was interested in your discussion of PBO and the independent board, or separate board, and its leadership given to the administration of aviation programs. Can you tell me how that relates to discussions in the last—well, I think maybe even legislation in the last Congress for an independent FAA, and that has been discussed recently, again, by Frank Wolf who chairs the Transportation Appropriations Subcommittee.

    How do you view the call for an independent FAA with your proposal regarding PBO?

    Mr. MINETA. Well, we feel that the FAA ought to remain within the Department of Transportation. One of the advantages that it has right now is because it has a spokesperson at the table, namely, the Secretary of Transportation—if FAA were an independent agency, there would not be someone at the table, when some of those very important discussions are taking place.

    So I think we feel that it ought to stay within the Department of Transportation, but we also feel that the FAA ought to be servicing its clientele. It ought not to be existing just for the sake of the agency, and so that is why we said that the air traffic control service's piece of it should be separated into a Performance Based Organization where you can delineate objective criteria as to whether or not they are really doing their job, because it is very much a business-oriented type of activity.

    It is an agency in which, with the rapid technology changes, it is a 24-hour-a-day operation, that it really has to have this kind of driven management objective, and that a public interest board of directors, with a chief operating officer, would be able to do that.
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    I think one of the problems with an independent agency is it really diminishes, I think, the importance of the agency. Even though independence may sound great, I feel that the FAA—I think one of the problems, just as an aside—because the FAA is such a large part of the Department of Transportation, I think it feels it ought to be its own agency.

    But, to me, size itself is not a determinant as to whether or not you are an independent agency. It is a question of whether or not there are related functions, and to me, it seems to me that given the intermodal nature of transportation, that aviation, as a mode, ought to stay within the Department of Transportation.

    It then has a Secretary who is sitting on the Cabinet, at the table, whereas if it were an independent agency over here by itself, you know—and I remember the discussion we used to have about the Veterans' Administration. It used to be an independent agency.

    But you know, they always kept saying, ''We are not being heard,'' and so we elevated it to a secretarial position.

    So I would hope that there would be this recognition that the DOT, Secretary of Transportation, serves as the spokesperson for the FAA, and that the FAA ought to be staying within the structure, and yet you can take the air traffic control services, and really make it a client-served agency, and make sure it meets its objective.

    Mr. PEASE. Thank you very much.
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    Ms. Garvey, there are a number of Members on this committee, obviously Members in Congress, who have small airports in their district, and some, we think, could benefit from the contract tower system, and now we have got at least some litigation that says we cannot do that any longer.

    Have you had a chance to look at that litigation and the implications, and if so, can you tell us where the FAA intends to go in this whole area.

    Ms. GARVEY. Thank you, Congressman.

    It was a very tough issue for us because we actually do believe that it is a program that has worked well, and in fact, we had a summit a couple of weeks ago with airports that have contract towers. It was a very positive, good discussion, and there are lots of issues where I agree with NATCA, and the controllers, but this is one where we just have a differing point of view.

    We have looked at the court judgment and we are going back for further clarification. There is enough ambiguity in what we have seen, that it is the opinion of not only the FAA lawyers, but also DOT and Justice, that we need to ask for more clarification, and we are in the process of doing that.

    We had to make that decision by the 16th, so we are asking the court for clarification of some elements of it. So we will have more to report to you, I hope very soon, on that.
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    [The information received follows:]

    FAA is coordinating with the Department of Justice on a Motion for Clarification in the case of National Air Traffic Controllers Association v. Peña, et. al., Case No. 1:94 CV 0574 (N.D. Ohio), and expects to file the Motion in June 1998.

    Mr. PEASE. Thank you very much.

    Ms. GARVEY. Thank you.

    Mr. PEASE. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Mr. Pease.

    Next, my teammate, my partner on many things, Mr. Traficant.

    Mr. TRAFICANT. Thank you, Chairman.

    For the administrator, are you familiar with such enhanced vision technologies as laser guidance?

    Ms. GARVEY. I am familiar in a limited way, Congressman. Let me say that I know we are working with a company to look at certification, to secure certification.

    I think your point about ''let us take advantage of every technology that is out there'' is very important, and we want to work and are working with a number of firms to make sure that we get the right certification in place.
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    Mr. TRAFICANT. The reason why I ask that is I asked representatives of the Safety Board if they were familiar with certain laser guidance systems, and they were not.

    Are you familiar with ultraviolet guidance systems?

    Ms. GARVEY. Not specifically, Congressman, but I will certainly check with our staff.
    [The information received follows:]

    [Insert here.]

    Mr. TRAFICANT. Are you familiar with cold cathode technology systems?

    Ms. GARVEY. No. But I will certainly look into that with our staff.

    Mr. TRAFICANT. I do not mean, you know, to put you on the spot. I think you are doing a great job. But I want to say this to our Chairman, to this committee. Many of the disasters we are having, as Chairman Mineta pointed out, we sort of have the safest travel in the world in airline travel, but there has been a static number over the years, and much of it has to do with planes not touching down in a proper area of a runway to successfully land, and there are a number of exciting new technologies out there.
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    The Safety Board is not familiar with it. FAA is not familiar with it. I think we get humdrum in the budgets around here. Maybe we have to enhance safety, significantly.

    With that, I would just like to say to the administrator that the military has been using some of these enhanced safety systems, and perhaps maybe we have got to, as a Congress, insure that safety systems are looked at.

    But I want to commend you for the job you ar doing. You do not have an easy one.

    Ms. GARVEY. Thank you, Mr. Traficant.

    Mr. TRAFICANT. To our former Chairman, it is good to see you, Norman. I want to thank you personally for all the help you have given me, and I know Eddie Bernice has talked about the help you had given her and so many of us. I want to thank you for that.

    You know, one of the things we looked at, of your commission, one of the things the Safety Board does, when they are reviewing and going over and investigating an accident, it does not seem like they use the expertise of the aircraft manufacturers as much in these investigations.

    From your position of taking a look at this, do you think we would be better served if there was more of a comprehensive investigative body that included the aircraft manufacturers and their people as well, and their experts?
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    Mr. MINETA. Mr. Traficant, we did take a look at that during our deliberations. As I recall, the ICAO standards I think has more involvement of parties, across the board, and they were recommending, I think in the ICAO approach, that there be more involvement of various parts of the industry.

    There was a long discussion about that whole issue, and a feeling on the part of the commission that that is the way we should be trying to get people involved, that there be—and that is why in the recommendations, as it relates to the safety part, we talked about there ought to be a strategic plan in dealing with the safety issue, and that people ought to be able to do information sharing in a non-punitive way, and that is why we think, yes, there ought to be more people, so to speak, at the table as they are talking about this, and that there ought to be more dialogue among the parties.

    So we have gone I think a long way towards what the ICAO structure would talk about. As you have indicated, should the manufacturer be involved? Yes, sir, as are other elements, as should other elements of the accident investigation team.

    Mr. TRAFICANT. The only other thing I would like to say maybe is a comment, and then maybe as a question. I think we have commissions that are established. They do find work. I do not know of any review commission that could have done a better job under the leadership of our former Chairman.

    But sometimes these commissions and their findings, once they are submitted, fall on some shelf somewhere and nothing is activated from within these reports.
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    I think that has got to change and I think that this review commission and their findings should be incorporated into the planning methodology of our committee and how we relate with FAA, the Safety Board, and the whole mechanism.

    So I would just like to offer that, Chairman, thank you for what you have done, but in your opinion has it not been a fact that many of the commissions that come up with good reports, that it seems like these are like blue ribbon panels that make good publicity, but the context of their findings never seem—they make substantive change within the ranks of Congress.

    Mr. MINETA. There is no question that there have been a number of commissions, and all kinds of subject matters, and that those reports, as you have said, end up on the shelf.

    I think in this instance it was very, very different. As compared to other commissions where you have minority reports, dissenting opinions, et cetera, in this one you had 21 commissioners who unanimously endorsed this report, signed on to it, and when we started in April we had 21 people who came to the table with their parochial interests.

    But by the time we started to form what we ought to be looking at in terms of a formulation of a final report, or of a report, Members were starting to contribute looking at the total picture, and not just from their parochial interests, and so this report ended up being a bottom-up report with commissioners inputting, competent staff with Mr. Traynham, Mr. Feldman, Donna McLean and many others, Michael Reynolds, who participated in the writing of it, and that is why we feel this report ought to move forward.
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    Plus one other additional element. We submitted our report on the 11th of December but the 21 members of the commission still talk to each other, get together, and want to see this work product into legislation, and we also have an administration that is using this as a blueprint for many of the activities of Administrator Garvey, if I can even say that, and as you have heard, they are coming forth with legislation and we have in the back of this also draft legislation. They are going to be submitting their own, shortly, and so again, we are still working with them, even though we have submitted our final report.

    But this commission feels, very strongly, that we do not want it just to sit on a shelf.

    Mr. TRAFICANT. Well, with that, I would just like to thank you again, Chairman, and I know you have networked and worked with everybody, and included the suggestions of everybody throughout your career. I think you did a marvelous job here.

    Mr. Chairman, Chairman Duncan, I would like to say this. I think that the report submitted by Chairman Mineta must be reviewed very carefully and I think we should enact much of their recommendations. They make an awful lot of sense, especially on safety, and especially on the way everybody should be working together for a common goal.

    I think he lays out a good blueprint. I do not think it is outside of the goals that we have all discussed for many years. It might be a good place to start.

    So I want to thank the Chairman and thank the administrator.
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    Ms. GARVEY. Thank you, Mr. Traficant.

    Mr. DUNCAN. Well, I think that is a good suggestion. I think also what we should do is we should make sure that the staff distributes this report to each of the Members who were unable to be here with us this morning, with a very strong recommendation that they try to read as much of this report as possible.

    Dr. Cooksey.

    Mr. COOKSEY. Thank you, Mr. Chairman.

    I will preface my remarks by saying that I have a great deal of confidence in FAA. I fly under the direction of your traffic controllers, occasionally, myself. That is probably very dangerous, but particularly with the airlines, and it is good. This is a good report from what I have seen.

    I would like to ask you a question about the international accident rate. I used to spend a lot of time, back and forth, in East Africa, and I noticed they have an alarmingly high accident rate.

    Are these African carriers, are any of them European carriers, or are any of them American carriers?

    This is in section 4, part 3, section 4, the FAA's Rules of International Aviation. Do you happen to know that, off the top of your head?
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    Mr. MINETA. Not right off the top of my head, but most of those were native to those countries and that is why in our report we also feel that the FAA, and the industry, aviation industry, really has a very big interest in promoting safety worldwide, and we also indicate in here that the FAA really should become like the Centers For Disease Control has become, in terms of monitoring health around the world. We feel the FAA ought to be in that same position as it relates to aviation safety, because international travel is growing so much, that a U.S. citizen cannot distinguish between, or ought not to be stepping on an airplane, saying, ''Is it safe, really, to be on this airplane?''

    They ought to be able to have some modicum of assurance that it is safe and we feel the FAA ought to be in that position to do that kind of work worldwide.

    Mr. COOKSEY. Well, most of the carriers that we used to use to travel into East Africa, to Kenya, Mozambique, and so forth, were European carriers, and of course South African Airlines going into Mozambique, and yet I know that the former Soviet Union has a lot of accidents, in Russia, and they have a frighteningly high accident rate.

    But you can at least take an American carrier to Moscow, it is my understanding, without too much difficulty.

    Another question of you, Ms. Garvey. There were some promises made on airport improvement programs last year and I was very pleased with what was done for one of the airports in my area, and I believe one of your staff people here did a great job. I later heard a rumor that some of those programs may be cut back. Are any of those AIPs going to be cut back, sacrificed, because of some of the budget negotiations?
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    Ms. GARVEY. Actually, we, Congressman, are proposing I think a very strong airport program, $1.7 billion in our AIP program, which will be part of our reauthorization proposal.

    So I see it as a very strong program of really strong commitment to the smaller airports as well and we are looking at ways that we can increase flexibility for some of the smaller airports to finance some of the important infrastructure for them as well.

    So I think it is a good, strong program and not really cut back.

    Mr. COOKSEY. Okay. So the promises that were made last year will hold up in 1998, in most cases?

    Ms. GARVEY. Let me be sure and double-check that with staff, but I am certainly not aware of any promises that we are not going to be able to keep, and I will certainly follow up on that for you, Congressman.
    [The information received follows:]

    FAA is honoring all Airport Improvement Program commitments for 1998.

    Mr. COOKSEY. I would hope so.

    Very quickly, Mr. Mineta, the AOPA claims that general aviation is paying for its use of the system. Your commission did not think so. Why not?
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    Mr. MINETA. Well, what we have indicated is that the FAA should go to a cost accounting system. That the users of the system ought to be paying for the system. But we have excluded two areas, one, as it relates to safety, security, public use aircraft and military—saying that those functions ought to be coming from the general governmental budget because that is a general public benefit.

    That the portion, as it relates to general aviation, ought not to be based on user fees, but ought to be based on a fuel tax-based system. We recognize that general aviation really does not pay for all of its costs, but because general aviation plays such a vital part of the aviation field, we want to keep general aviation on a fuel-based tax system, and not increase that tax on the general aviation field.

    Mr. COOKSEY. But I would point out that general aviation pays a much higher tax rate than the airlines, it is my understanding from your report.

    Mr. MINETA. Well, in terms of gasoline, the gas portion of it, they do.

    Mr. COOKSEY. But it is 20 cents as opposed to 4 or 5 cents, whatever.

    Mr. MINETA. That is correct.

    Mr. DUNCAN. I apologize, but we are going to have to break at this point for two votes, but we are going to keep this recess very, very short because we have got a couple of other Members who want to ask some questions, and we will be back very, very shortly.
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    Mr. DUNCAN. On the record.

    I apologize for the delay, but I had some Members who wanted to discuss some things on the floor. We will go ahead and start back into the hearing at this point, and hopefully let Chairman Mineta and Administrator Garvey go in just a few minutes, and get to the next panel.

    But first, Ms. Johnson has been here from the start, and Ms. Johnson, I am going to turn to you for any questions you have at this point.

    Ms. JOHNSON. Thank you very much, Mr. Chairman. My questions will be short.

    I first want to compliment Mr. Mineta and the panel for completing a good report, and under budget, which is extraordinary. We thank you.

    To Ms. Garvey, I need to ask of you the status of the engineering project, the Engineering Program of Excellence.

    Ms. GARVEY. Yes, Congresswoman, the engineering centers, as you know, have been something that we have been looking at. We started with 12 potential sites, narrowed it to 6, and it has now been narrowed to 4, and we are going back to each one of those locations, and asking for a fuller financial proposal. We will be evaluating those over a several month period, and I will get you the exact time line to your office. But we have narrowed it to the four very good sites, going back and asking for the financial documents and proposals that they could put together, and hope to move out on that then as soon as we receive those. Thank you.
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    Ms. JOHNSON. So those requests you are saying are out to the sites?

    Ms. GARVEY. I believe that the letters literally just went out, or they have probably gone out just in the last day or so, or will be going out before the end of the week, but we were contacting those four sites and asking for the specific proposals, but again, I will get you a more accurate time line.

    I know it will take a couple of months. We are going to give them a period of time to get the proposals back. We will evaluate them within the Department, and then make the decision.

    Ms. JOHNSON. Is this a change in the original procedure?

    Ms. GARVEY. I do not think it is a change in the original procedure. When we got it down to four, they were very similar, and there were lots of strengths to each one, and we thought it might be useful to go back to those locations and ask for a financial package, and I believe that was always anticipated, but, you know, I may be wrong. I just came into it in August. But I know at that point, when we got it down to the four, there was the discussion going about back out.

    Ms. JOHNSON. The time line was set to be what, 3 or 4 months ago?

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    Ms. GARVEY. Yes, that is right, Congresswoman. We are a bit behind on that, and we do want to make sure we get some good proposals and give the locations the opportunity to put something together that really makes sense from their perspective as well, and get the best possible proposal.

    Ms. JOHNSON. And you are going to be submitting something, you say, to my office?

    Ms. GARVEY. We will. We will give you a more accurate time line, let you know when the letters went out, when we expect the proposals back, and how long it will take us to evaluate those, Congresswoman.

    Ms. JOHNSON. Thank you very much.

    [The information received follows:]

    [Insert here.]

    Ms. GARVEY. Thank you.

    Ms. JOHNSON. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Ms. Johnson.

    The National Air Disaster Alliance, representing the families of air crash victims, from whom we will hear later, recommends a $5 per passenger fee to be spent solely on the safety recommendations by the National Transportation Safety Board. Any comments, Chairman Mineta, about a proposal like that?
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    Mr. MINETA. Not really, Mr. Chairman. As I recall, the Family Assistance Program is now under the jurisdiction of the NTSB, as I recall. Is it suggested that that money would then go to the NTSB or——

    Mr. DUNCAN. Right. Well, it would go to the airlines to pay for the safety improvements that the NTSB has recommended.

    Mr. MINETA. I see. I see.

    Mr. DUNCAN. But it can only be spent for those safety-related purposes.

    Mr. MINETA. Well, I just do not know enough about it to really comment on it, Mr. Chairman.

    Mr. DUNCAN. Well, Ms. Garvey, you know, a Federal appeals court recently struck down the FAA foreign overflight fee. Do you think that has any implication for going to a user fee system for domestic flights, or——

    Ms. GARVEY. Mr. Chairman, I think it certainly will make us look at the proposal more carefully. I think that it was interesting in the court decision, as I understand it, that they were not necessarily challenging the ability or the responsibility of the FAA to set a fee, but they were not happy with the tack that we chose, the Ramsey pricing.

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    So I think it is certainly something that we will be looking at, if and when we move to the user fee system. We will have to look at a procedure that would be more in keeping with the court decision.

    Mr. DUNCAN. Let me ask you one other question.

    You mention in your testimony, you say the entire FAA should be supported by a combination of cost-based user fees and other user charges.

    What other user charges do you have in mind?

    Ms. GARVEY. Mr. Chairman, we had the same concern that the Commission did in terms of general aviation, so we were looking at the fuel-based as well. Again, this is still being discussed within the Administration but the approach that I believe the Administration will take will be to separate out the general aviation community and use the fuel-based taxed. It will be a combination of that and the user fees.

    Mr. DUNCAN. All right.

    Chairman Mineta, what do you think? If you had your own personal choice of any recommendation that your commission has come forward with, what do you personally think is the most important?

    I know that you are speaking here this morning on behalf of the whole commission, but I mean, if you had your choice, or what do you think is the absolute biggest, single most important recommendation that you have made?
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    Mr. MINETA. Well, Mr. Chairman, because we feel that the integrity of the report is really based on the four corners, and they are really tied together, but if I were to just say one thing, I would say the PBO as it relates to the air traffic control services, would be the important piece of the total.

    Mr. DUNCAN. So that is, then, one that we should really focus on in this subcommittee?

    Mr. MINETA. I believe so, Mr. Chairman,.

    Mr. DUNCAN. All right.

    Dr. Cooksey, any other questions?

    Well, thank you very much, and I am sorry that we were interrupted by the votes, but I think you both have had that happen before. I know Chairman Mineta has had that happen many times. So thank you for being with us this morning.

    Mr. MINETA. Thank you very much, Mr. Chairman.

    Ms. GARVEY. Thank you, Mr. Chairman.

    Mr. DUNCAN. It has been very helpful.

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    Mr. DUNCAN. We will call the second panel forward at this time, and the second panel consists of Mr. Phil Boyer who is the president of the Aircraft Owners and Pilots Association Legislative Action; Mr. Mike P. McNally who is the president of the National Air Traffic Controllers Association; Mr. Michael D. Fanfalone who is president of the Professional Airways Systems Specialists; and Ms. Gail A. Dunham who is the president of the National Air Disaster Alliance and Foundation, and as usual, when we have numerous witnesses, I always proceed in the order that they are listed on the call of the hearing, and that means that Mr. Boyer, we will proceed with you first, and you may begin your testimony.

    Thank you for being here with us.


    Mr. BOYER. It is a pleasure to be here, and I enjoyed, with great interest, the explanations by both the administrator, and the mutual admiration society for former Chairman Mineta, and his work on this commission.

    Let me tell you that it was a pleasure to listen to all of you compliment him on his leadership.

    You forget that we, as witnesses, however, look at a large picture of him every time we sit at this table, so he is on our mind, constantly, as he has been through this exercise.
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    I have 25 pages of testimony that I am going condense into 5 minutes, so I would ask you to look at our comments on reauthorization, some of them on the President's budget proposal for the coming years as it relates to aviation, and focus my remarks on the National Civil Aviation Review Commission recommendations.

    Mr. DUNCAN. Well, let me say this. All of the witnesses, your full statements will be placed in the record if you do not get to cover your full statements during your 5 minute presentations.

    Mr. BOYER. Thank you very much.

    You well know, because you worked on the legislation creating the commission, it was thoughtful and it was reasonable. Transportation Secretary Slater appointed 13 of the members, including the Chairman, and I must tell you that we inputted to the White House the fact that Norm Mineta would make an excellent representative, along with others that we placed on the list that were key in the general aviation community.

    It was of interest to me that when Mr. Mineta turned around and looked for other commission members in the room, he could not identify many of the distinguished people here who are from general aviation, and there were lots of them in the room at the time.

    We clearly felt that we were unrepresented on this commission, perhaps that's why there were no dissenting votes.

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    Mr. Mineta did, on the other hand, give us tremendous access, and his staff did, too. We were able to talk to the commission and to him, personally. It was as open a process as he was when he chaired this committee and others, and for that we applaud him.

    However, at the end of the process we agreed to disagree, and so perhaps I can for you, present some of the reasons we did disagree, along with some of the things that we found as positive. In the positive aspects we applaud their recommendations, that they felt there was micromanagement of the agency by the Department of Transportation and also the OMB.

    They endorsed something we have talked about in this hearing room—a link between the revenue that is brought in by aviation and FAA spending. And for general aviation, as you heard, they did acknowledge that we are somewhat unique and for efficiency and safety, our present excise taxes should remain, rather than user fees.

    We applauded their look at the FAA and the culture within the FAA, that they wanted FAA to move toward serving the users a little bit more in a more business-like fashion.

    They offered many, many safety initiatives which we applaud, and also recommended full funding of the airport program which I think is extremely important.

    On the other hand, we feel they ignored, perhaps, a basic premise which seems inherent to us, as this committee and others look forward at where the FAA is going. Are we putting the cart before the horse, when we look at how we are treating the agency?

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    Should we concentrate, as we have done so far this morning, on the funding pattern before we figure out what it is going to cost and what really needs to be done to modernize our system and create capacity enhancements?

    You know, it is interesting, if you look at page 11-6 in your report, there is a graph that was referred to earlier, and it indicates, as a matter of fact, what will happen if FAA sinply maintains our current air navigation system and we do not modernize. It shows delays by aircraft, and while it may seem very minimal to you to see that in the year 2008 there will be a two minute and 45 second delay, that is per commercial aircraft, and it is crippling to the industry.

    But you know, what is interesting is they left a graph out of this report, and you will find that graph in our written testimony, and what it says is if you make some incremental changes, if you do things like Congressman Traficant maybe suggested, you may be able to significantly change the capacity constraints, and American Airlines and Mitre Corporation, a consultant to the FAA, have confirmed this.

    The NCARC recommendations are disappointing in several respects. A reduction of the contribution of the taxpayers, a small contribution, that comes from the general fund to support our national air transportation system. We do it with many of our Federal resources, and what could be more important than the vibrant air transportation system we have in this country?

    The Chairman of the commission reported to you that they want to retain the excise taxes for general aviation. He answered your question, Congressman Duncan, in that regard, and he said ''and not to change our tax rates.''
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    I would like to quote from the commission's recommendations.

    ''Notwithstanding this recommendation, it is clear from existing aviation cost allocation studies, that the current level of tax payments does not cover the costs general aviation imposes on the FAA. The commission believes that fuel taxes imposed on general aviation should be reevaluated based on an accurate analysis of the costs of providing ATC and related services to them.''

    That sounds to me an awful lot like words that would eventually yield some kind of a tax increase. So I do not consider this report today in stone, no tax increase for general aviation.

    As a matter of fact we were called into one of the commission meetings at the 11th hour. We were faxed a proposal with a note saying we would like you to respond in the morning when you come before the commission to a to a doubling of your fuel taxes. Obviously, I do not have to sit here and explain hat our answer was.

    The other thing I think that you concentrated on this morning was the PBO, the buzz word, this vague kind of organization called a Performance Based Organization, which we all would expect the FAA would have had in place years ago, or would have had in place right now.

    A new layer of bureaucracy, a board of director funded with user fees. For heavens sakes, we all want to grant the FAA more flexibility. We supported your committee recommendations on procurement and personnel reform, and we support, completely, the job of making the FAA independent.
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    As a matter of fact I was interested in the answer that came up about making the agency independent.

    I would just offer to you four letters, and say they have not suffered at all, and those letters at N-A-S-A, which is an independent agency and has served our country well in technology and modernization, and certainly in our space program.

    You know, when you look at PBOs in Government, the U.S. Mint, the National Technical Information Service, the Federal Housing Administration, Mortgage Insurance Service, they are all small organizations. Their budgets measure in millions, not in the $9 billion we spend a year, and even further, as we know, in coming years for the FAA.

    Basically, it is important to look at a two-tiered system when we come to user fees. You asked that question very, very succinctly and you got an answer. Why are we concerned?

    Well, you know, I guess my member are as much of the American public, skeptical about promises that we will always maintain a two-tiered system—user fees for the airlines, and general aviation fees.

    And if we want to acknowledge, well, maybe that will not happen, let us just look at Europe. They had a two-tiered system. Instrument flights and commercial airliners paid through user fees, general aviation through taxes.

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    What happened? Before long instrument flying was charged user fees in general aviation in Europe, and now there is a call for just the flights we make under visual flight rules, not talking to anybody in many parts of the country, on clear, bright days, for those flights to be charged user fees in Europe.

    I guess that history, that actual experience, scares us just a bit. In the interest of time, let me just say that we applaud the efforts of a cost accounting system.

    But October, as Administrator Garvey said? We are not so sure. You know, in Canada, they have gone to a PBO, a privatized system and at Transport Canada. They have been developing their cost accounting system since 1984, and in our interface with their officials, they almost kind of are laughing, certainly amused at hearing that FAA will have this in place here by October 1998.

    We believe that there are many good recommendations in the Civil Aviation Review Commission, but the key is, as Norm Mineta said, they must be taken all collectively.

    I guess we would like to see a reordering of those before we blanket past this as a complete solution. Let us get the cost accounting system in place. Let us make the incremental improvements that cost millions, approve those. And they are in our testimony.

    Then let us look at the cost for all of this and decide whether we need to upset a 30-year history of paying efficiently through a fuel tax and a passenger tax for the system. Thank you.

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    Mr. DUNCAN. Thank you very much, Mr. Boyer. Next is Mr. McNally.

    Mr. MCNALLY. Chairman Duncan, thank you, once again, for inviting the National Air Traffic Controllers Association to come before the subcommittee.

    I would like to request our full testimony be submitted for the record, it is quite lengthy, and certainly, I am only going to focus on a few items.

    Unfortunately, sir, I am not prepared here today to talk about NCARC. I am still trying to figure out what a PBO is myself, so once we get down to that point I think we might be able to speak more intelligently on it.

    However, on a more parochial basis, in October of 1995, with the enactment of Public Law 104-50, which is HR 2002, Congress mandated the FAA to develop a new personnel system.

    Ironically, NATCA, almost 6 years and $2 million ago began a sweeping effort to correct the classification system for air traffic controllers, a daunting task at best, but we have come to the point where, in 1998, we have completed two of its three phases.

    Amazingly, we have threaded our way through a bureaucratic maze with FAA counterparts to first collect nationwide data from every type, level and facility, and two, create an equitable classification standard.

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    Now we are on the brink of the third and most difficult, the associated pay compensation system.

    I need to first explain why we devoted tremendous resources, financial and human, to reclassification of the air traffic controller's occupation. It is not just about money.

    The standard used for many decades has not been fair or representative of the work we do. A GS rating cannot embody factors endemic to air traffic control. Some of those factors are the number and types of runways at airports, the mix of traffic, for instance, military, oceanic, commercial jetliners, cargo haulers, commuters, single-engine aircraft.

    Other variants involve controller equipment, varied equipped aircraft, traffic, and climb and descent volume. The old classification system could not predict the vast shifts in volume due to the hub and spoke concepts, or more simply, the astronomical growth in traffic overall.

    So the purpose of reclassification is much more broadly defined. We are trying to correct the dysfunctional classification system implemented 30-plus years ago, one never on target for the highly specialized work and complicated levels of expertise required of air traffic controllers.

    NATCA has taken a lead to correct an oversight that has negative impact on the workforce for many years. All the while, the controllers have continued to work diligently, often, the only lifeline between a pilot and his or her safety. Controllers who work live air traffic are responsible for millions of lives each day. Decisions and control instructions must be precise and correct to maintain a safe and orderly flow of traffic.
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    The obvious benefit is the safe arrival of these men and women flying to destinations around the country, indeed, the world. By virtually any hardstick, the numbers of flights to numbers of aircraft, to passenger seat miles, to airline operating revenues, the singular contribution of air traffic controller today can neither be ignored nor minimized. This economic contribution is virtually unparalleled anywhere in the world.

    Sir, we need your assistance with the third and final phase of reclassification, the all-important one that will take it off the drawing board and make it a reality.

    Our controller classification system is based on the knowledge, skills, and abilities required to safely and efficiently control the volume and complexity of traffic at a given facility. The base pay schedule we have developed is directly related to the volume and complexities at each of those facilities.

    This committee is uniquely positioned to rectify mistakes of the past and set a new course for the air traffic controller occupation.

    We ask for your support to ensure sufficient resources are identified and/or made available to the FAA for conclusion of their reclassification initiative.

    On a separate note, item number two, in 1995, the same bill Congress passed, HR 2002, which exempted the FAA from various Title V provisions. This was personnel reform that gave the FAA's employees consultation rights only.
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    In 1996, Congress passed HR 3539, the FAA Reauthorization Act, which gave FAA unions the ability to negotiate personnel changes.

    However, the language in HR 3539 established Congress as the final arbiter on negotiation impasses. Even though I personally assisted in crafting HR 3539 language , NATCA had never agreed that Congress should be the final arbiter when such mundane personnel issues are in dispute. We feel those issues exempted under Title V, that are being negotiated between FAA and the employees' exclusive representatives, that may reach impasse, should go before the Federal Services Impasse Panel for final resolution, as do other matters covered by Title V, chapter 71.

    Our extended testimony has suggested legislative language that would correct the current system. By making such a change, Congress would ensure, one, that FAA's management negotiates with its employees in good faith, and two, that Congress does not become bogged down in personnel issues.

    Finally, that through the FSIP, this agreement between the FAA and its employees will resolve in a fair and impartial manner.

    Again, Mr. Chairman, thank you for having us here today and I would be more than happy to answer any questions.

    Mr. DUNCAN. Thank you very much.

    Mr. Fanfalone.
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    Mr. FANFALONE. Thank you, Mr. Chairman.

    Good afternoon. My name is Mike Fanfalone. I am president of Professional Airways Systems Specialists. Thank you for inviting PASS to testify today. PASS represents over 10,000 system specialists, flight inspection pilots, aviation safety inspectors, and safety support staff employed by the FAA.

    While there are many concerns raised by the workforces we represent, that our request be entered for the record through our written testimony, I would like to take this opportunity to highlight just three significant issues. The first concerns the integrity of the National Air Space System, and the capacity of that system as demands are increased.

    For years, the field level technical staffing for airway facilities has steadily decreased, while at the same time contractor-supported maintenance has increased. We believe the impact of not having on-site skilled capability to restore the NAS is significant.

    By way of example, the average time to restore failed equipment has increased from approximately 7 hours in 1983 to about 27.5 hours in 1997.

    Total unscheduled outage time for the NAS has increased to over 600,000 hours. In addition, NAS delays which are caused by equipment outages have increased about 30 percent in recent years to about 6,500 during fiscal year 1996.

    Given these outage and delay figures, PASS believes that this is not the type of system that the aviation industry or the American flying public deserves or desires.
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    According to the FAA's own staffing plan, Airway Facilities is currently staffed at 71 percent of its staffing standard. Airway Facilities recognizes that the level needs to be at a minimum of 80 percent, which would result in 575 currently vacant positions being filled.

    However, the FAA has only asked for 150 additional positions for fiscal year 1999. PASS would like to point out that even if the staffing were increased to a 100 percent of the standard, this would still not account for needed attention to occupational safety, health, or environmental concerns. Problems with asbestos abatement, for example, or dust control in the control room, have recently cost the FAA millions of dollars to correct.

    PASS believes that the resources needed to meet the Airway Facilities staffing needs are currently available to the FAA. In the NCARC report of December 1997, it was suggested that by consolidating regional offices, and reducing the regions from 9 to 3, FAA's operating costs could be reduced by nearly $100 million a year.

    Mr. Chairman, we ask that Congress investigate the FAA's allocation of personnel. We believe the agency has the resources to get the job done. It has just chosen to distribute them unwisely.

    The shortage of properly trained systems specialists in the field is jeopardizing the quality, the efficiency, and the safety of the NAS.

    Another issue PASS is concerned about is the year 2000 computer problems. The FAA is currently assessing the scope of the problem and has committed that all NAS-related systems will be Y2K compliant before the year 2000.
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    However, PASS would like to point out that the year 2000 is already causing problems with the NAS. For example, the tandem system which is located at each air traffic control center, and runs software called Maintenance Management System, is showing that its database is already corrupted.

    This database holds records used by the NTSB, if there is an incident or accident involving aircraft in the NAS. Administrator Garvey has asked that some funds be reprogrammed to help bring the agency systems into compliance for the year 2000.

    PASS believes that more money is needed and does not understand why the agency is unwilling to ask for it.

    If the FAA merely re-programs funds already allocated, PASS foresees a severe impact upon the operations budget.

    That means, over time, travel and training will be the first to go, and possibly employees as well, through furloughs.

    Lastly, one very important issue that affects all FAA employees, is the lack of Merit System Protection Board jurisdiction.

    The procedural protections offered under the MSPB are far superior to those available under either a negotiated grievance procedure or the FAA's own guaranteed fair treatment process developed following personnel reform.
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    In addition the MSPB office employs a procedure administered by Federal personnel professionals and experienced administrative law judges.

    When someone's career and very livelihood are in jeopardy, these are concerns that must be taken seriously. PASS feels that the goals of personnel reform at the FAA would not be adversely affected by permitting FAA employees to have access to the MSPB.

    This would be to appeal adverse and retaliatory actions as well as for protections in the event of a RIF.

    PASS requests that language be included in the FAA reauthorization bill to restore MSPB jurisdiction for employees.

    Before I close, as an aside I would like to echo and endorse Mr. McNally's comments with regard to requesting inclusion under the Federal Service Impasse Panel for bargaining impasses, and with that I conclude my remarks.

    Mr. Chairman, and Members of your committee, I will entertain any questions you have.

    Mr. DUNCAN. Thank you very much.

    Ms. Dunham.

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    Ms. DUNHAM. My name is Gail Dunham and I am president of the National Air Disaster Alliance and Foundation.

    Chairman Duncan, I trust that my full testimony is part of the record. Great. If anyone has questions, they should feel free to contact me at 888-444-NADA, National Air Disaster Alliance.

    Our goal is to raise the standard of safety, security, and survivability for commercial aviation, and for support of victims' families.

    Not one of you wants to walk in our shoes and live our experiences, so I hope that I have your attention.

    It is very difficult to lose someone in a plane crash, partly because the family discovers that the crash could have been prevented.

    The Safety Board makes safety recommendations; however, the FAA does not promptly direct the implementation of all of those safety recommendations.

    One of the things the alliance is requesting is that the FAA leadership should meet regularly with people from outside of the industry to gain a broader perspective.

    Just meet with us once in a while, and there are other people, I am sure, that would be helpful.

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    The FAA actions that led to the ValuJet crash demonstrated a need for immediate reform; however, it still seems to be business as usual at the FAA, and safety delayed is safety denied.

    TWA 800 would probably not have exploded over the skies of Long Island, if the FAA had required inert gas to be injected into the center fuel tanks. ValuJet would not have crashed in the Everglades if smoke alarms had been required in cargo holds.

    United 232 would probably not have crashed if a $10,000 safety valve had been attached to a hydraulic line, and if the titanium material in the engine had been replaced in a prompt manner.

    I also think that USAir 427 would not have crashed in Pittsburgh, in 1994, if the 737 retrofits had been completed.

    Let me give you an example of a 10 year, or more delay. March 3rd of 1991, United 585 was approaching Colorado Springs to land when the 737 flipped upside down, and within seven seconds, it was in the ground like a rocket.

    To this day, I have seen no record of a scientific investigation of 585. Within the week of the accident, I was told that one of the Safety Board members had experienced a rudder hard over on the United 737 simulator.

    It appears that many knew the cause of the accident but solving the problem was secondly because it was expensive and covering up the problem seemed more important.
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    United chased wind theories while United, Boeing and Parker-Hannifin destroyed what little was left of the power control unit. The internal contamination was destroyed, it was thrown away, never evaluated. Three key parts were lost, stolen or destroyed. The wreckage was not examined for 13 months.

    The flight data recorder was erased over by United on another errant 737. Although party to the 575 investigation, United was conducting their own secret tests for weeks.

    Finally, an anonymous telephone call to the Safety Board blew the whistle. The public hearing for 585 was canceled, probably because no one had the courage to testify under oath.

    With my limited resources, I have documents that the FAA knew in 1986 about the rudder anomalies that plagued the 737. The design phase was complete in 1992, or earlier. Foreign 737 accidents did not get the FAA's attention. Unfortunately, USAir 427 did get people's attention. But still, the FAA did not direct the industry to begin work.

    In March of 1991, we were watching the soldiers come home from Operation Desert Storm. Now, 7 years later, the entire country of Kuwait has been rebuilt, the U.S. has put a vehicle on Mars, but a passenger traveling on a 737 is still not guaranteed the safest plane possible.

    One year ago today, this press release was released. FAA proposes retrofit of 737 rudder components. One year later, not one 737 retrofit has been completed.
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    The FAA is allowing 7 years of safety delayed to become 10 years of safety denied. October of 1997, at the third annual meeting of the Air Disaster Alliance, our membership unanimously endorsed the Safety Board's most-wanted safety improvement list.

    We want the FAA to endorse all of these most-wanted recommendations. The FAA states that they implement 80 percent of the recommendations, which means they delay or ignore 15, 20 percent. Does a doctor remove 80 percent of a deadly tumor? Does the FDA approve pharmaceuticals at 80 percent strength? Does Toys R Us make a profit if toys are 80 percent safe?

    What industry finds an 80 percent quality control acceptable? People's lives should not be at risk because the FAA allows an 80 percent pass rate.

    The number one item on this recommended list is upgraded flight data recorders, and the issue is addressed in the report today.

    I have heard the Safety Board push, since 1992, that they want upgraded data recorders, yet the FAA has not directed that action. Jim Hall has stated that accident after accident has been hampered by inadequate flight data recorders, and still, the FAA refuses to direct the airlines.

    The FAA issued a press release in July of 1997. It does not really call for reform. It just gave the airlines another 4 years of delays. This item is number one on the safety list. The money and the technology are there. There is no excuses. This should be acted upon.
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    The Alliance is recommending that the July of 1997 press release be rewritten, just change the dates, take out 2001, or 2002, make this action effective June 1st of 1999, and direct them to move forward.

    The other probably most important recommendation that the Alliance has. The Alliance is asking this congressional commission to hold public hearings about the Safety Board's most-wanted list, and why these are not being acted upon.

    The airlines should disclose what they are doing to comply with those recommendations. If they are making safety improvements, they should be proud of their record. If they are delaying safety, which they have been doing with the flight data recorders, then the FAA needs to direct these improvements be done in a more prompt manner.

    But we need public hearings to disclose that information. Part of the answer is also a $5 user protection fee, that should be set aside and administered with independent oversight. We have suggested that consumer advocates such as Ralph Nader, or someone we believe in and trust, like Mary Schiavo, could draft the legislation to create this $5 user protection fee, so that funds could definitely be set aside for safety use.

    Aviation profits are at record highs. In 1997, United Airlines made over $4 million a day in pure profit. Many airlines and manufacturers are making millions per day in profits. The money is there. But still, the person who is purchasing a ticket is being shortchanged by safety delayed or safety denied. Is aviation safe? Yes; overall.

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    Could aviation be safer? Yes; absolutely. And we are worth it. The Alliance is asking this congressional commission to please promote the five recommendations that we have submitted to you.

    Mr. DUNCAN. All right. Thank you very much, Mr. Fanfalone. You caught my attention when you said that you think the FAA has the resources it needs but it is guilty of misallocation of those resources. Would you be a little more specific and tell us what you mean or give us some examples?

    Mr. FANFALONE. In airway facilities, for example, Mr. Chairman, there are over 10,000 employees of the FAA working in airway facilities. Not even 6,000 of those are actually working on the technical end of the NAS, itself. To me, that is 40 percent overhead.

    The NCARC identified nine regional offices that are there to provide administrative support and oversight and recommends that they be reduced to three, thereby, saving $100 million a year. These are personnel that are already on the rolls, FTEs, that have already been appropriated that we believe should be reallocated to the technical work place for hands-on support of the NAS.

    Mr. DUNCAN. Mr. Boyer, is that what you mean when you suggest that labor costs is one area where the FAA could save some money?

    Mr. BOYER. I think we have not taken a good enough look. We are not advocating fewer maintenance people, fewer controllers, but I do not think the FAA, as evidenced from the Coopers & Lybrand study and the GAO, has taken enough look, neither has the National Civil Aviation Review Commission, at the impact of adding technology and the resulting productivity savings that you or I in business would do if we were to add a major investment at modernizing our business through technology. That is what we were referring to as far as labor is concerned.
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    Mr. DUNCAN. Well, let me ask you this, you may have heard Chairman Mineta mention two different times, almost as if it was not in dispute, that general aviation was not paying its share of the aviation system.

    And I am sure that you have a little different opinion from that.

    Mr. BOYER. You know, I guess like many we question the cost allocation—there is no cost allocation. So, how can I respond to what are the costs attributed to general aviation?

    But let us take a number that is bandied around a lot, 60 percent of all the tower operations are provided to general aviation. We have got to look at what is general aviation using because it is there for the airliners. I came into an airport, I think it was Tampa, Florida, to give a speech many years ago. Three large 10,000-foot runways, now, when I flew a general aviation plane in there, I needed about 3,000 feet of one taxiway.

    So, how do we allocate that airport's use, even though there may be general aviation? The same goes for control towers that are there because the airlines are using those airports, how do we allocate the air traffic services for just visual flight rule days, in which they encourage us to use their service. Do we tell our members do not use those? That is not the best safety alternative.

    So, we are going to have to look and I think this is the prime question, let us look at a realistic cost allocation system that all of us can get involved in with the FAA as the Administrator says they are working on. And that is probably the number one thing that needs to be accomplished under the NCARC recommendations, before we begin to try to figure out how do we fund and what do we fund.
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    Mr. DUNCAN. Well, do you think that general aviation airports get their fair share of the airport improvement funds?

    Mr. BOYER. I think the record speaks for itself. This committee knows that over the last few years general aviation airports have taken a reduction. Only until last year when you, the Congress, got involved and raised the President's $1 billion proposal for the airport fund by 70 percent, did for the first time in several years we see our allocations begin to go up again. The formulas have been cut, the airports, we talk about airports that Congressman Oberstar mentioned, that need to be repaved. We have got airports in this country that are literally when you land are knocking up pieces of asphalt into the propellers causing damage to the planes.

    That is what ill repair we are in right now because of the under-funding. I think some positive steps have been taken. Last year, as I said, hopefully this year, the budget recommendation from the President we applaud the fact that he has come to light with the $1.7 billion. Should it be $2 billion? We believe so but we make believe some of that should go to a greater share for general aviation airports.

    Mr. DUNCAN. All right, thank you.

    Mr. McNally, at a hearing that we held last November on runway incursions, pilots partly blamed confusing air traffic, ''confusing air traffic control clearances shot rapid-fire over the radio with little chance for pilot confirmation.''

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    What do you think about that? Is that a problem as some people seemed to tell us last November?

    Mr. MCNALLY. It is certainly a factor, sir. I mean it is a fast-paced operation and you have to rapid-fire clearances to move the volume that is there. There are technologies that——

    Mr. DUNCAN. Does your group realize that there was concern among the pilot community about this?

    Mr. MCNALLY. We have had conversations with ALPA. We do have relationships with those organizations. The bottom line is that is just a factor, however, there are technologies that can ease that frequency congestion and I think make it a lot easier in the translation on those clearances, via Data Link and things of that nature is what we are looking at.

    Mr. DUNCAN. And referring back to that hearing, we were told that there were low-tech solutions to some of these problems, like the stop and go lighting system at the Boston Airport that is not being used because of controller objections, do you know about that?

    Mr. MCNALLY. No, sir. I find that hard to believe. That would be very convenient but I do not believe that.

    Mr. DUNCAN. You have said that under the current personnel system the FAA has little incentive to bargain with its employees in good faith. Do you not feel that the FAA is bargaining in good faith with you in your current negotiations?
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    Mr. MCNALLY. Yes, sir. I am not saying that they are not. What I am saying is that the track record of the FAA speaks for itself. I mean with Administrator Jane Garvey I mean we have gotten much greater confidence in trusting and working with the agency. But until she came, we certainly did not feel that.

    The protections of Federal Service Impasse Panel Procedures are just to keep it out of Congress and letting the panel that exists already for other issues to resolve those disputes if we cannot reach agreement on some what I consider to be fairly mundane personnel issues.

    Mr. DUNCAN. Well, you know, that we have made some personnel reforms, and you and Mr. Fanfalone, seem to think that some of those reforms should be changed now, do you not think? Well, first of all, we tried to involve both your groups in those negotiations or discussions about those reforms as much as possible, in fact, much more so than had been done in the past.

    Do you not think that since those reforms are so new that they should be given at least some kind of chance to see how they work first before we jump and then go to something else?

    Mr. MCNALLY. Well, sir, I mean we had—there was quite a few, there was quite a bit of activity going on back then with Title V exemptions. One of them was Chapter 71 and we certainly did not agree with that one and that was basically eliminate the unions.
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    So, not everything that came out of H.R. 2002 did we agree with and certainly this is one particular area. Yes, I did admit, even my short statement, that I did participate within the crafting of that language of H.R. 3539 that developed the impasse process.

    It was not what we had wanted, however. What we were looking for is some other alternative for that, but at the time that was the best that could be done.

    So, we agreed to let that be and go forward and take a look at it in the future. At least that was from our perspective and that is basically what we are trying to do right now. We are not looking for pay issues to go before the Impasse Panel or anything like that. We are looking at things that would normally not, Congress would not be bothered with.

    The pay issue, naturally is still driven by Congress and that needs to be separated out completely.

    Mr. DUNCAN. Well, there certainly was no effort to eliminate the unions in any of our recent legislation. Or, at least I do not think there was, that I know about.

    Ms. Dunham, your recommendations certainly have a lot of appeal to me and to many, many other people. I guess though you realize that there are no real simple easy solutions to these things. I mean everything looks easy or simple on the surface, but you very quickly, when you get much below the surface you find out that these things are much more complicated. And, for example, I mean you threw out that figure about the airline profitability as if that almost was a bad thing. But if the airlines do not——
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    Ms. DUNHAM. I have a pension from the airlines, I am delighted.

    Mr. DUNCAN. Well, what I am saying though is that if the airlines, if they are making profits they attract other investors. And if they attract other investors then they are able to invest in new equipment and it makes the whole system safer.

    And, so, that is one thing I think we need to keep in mind. We need to encourage the airlines to make profits so that the system will become safer. That is very important, I think.

    And then also the airlines would tell us, I think, that a great portion of the cost of tickets now is being spent toward safety, toward safety measures. You know, much of the pay that goes to their employees, it is a huge percentage of that is directed towards safety.

    And then, you know, now in addition to what the airlines pay, you have got passengers paying a 9 percent ticket tax, you have got a $1 segment fee, you have got up to $12 in passenger facility charges. You start adding these things in and if you keep on, you know, we can, we could do so much that we force the prices up and the airlines will say that they are already up almost as high as the market will bear. And then you end up putting more people onto the highways, which are hundreds of times more dangerous, than flying and, so, you end up killing more people. Except it is just not as noticeable because individual car crashes do not receive the publicity that airline crashes do.

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    And, so, what I am saying is this, there is not a person on this subcommittee who does not want to do everything that is humanly possible to make air travel as safe as we possibly can. But it is not a real easy thing. Do you understand what I am getting at?

    Ms. DUNHAM. I am not here to try and raise the taxes on tickets. I have watched what has happened in the last 30 years and I think that airline tickets are pretty high right now and I think they are very heavily taxed. However, the $5 user protection fee that we are proposing we feel that it is already there but that the travelers have no input as to how the money is being spent for safety. And that is why we are suggesting an independent oversight for some of those funds so that the money is spent on safety measures.

    And the cost of the upgraded flight data recorders, if you flew Quantas 737, they have flight data recorders with over 200 channels. We have 737s in the United States that the flight data recorder is never going to be updated and you have some of the old ones flying here that have no flight data acquisition units or maybe some that are still equipped with five, 11, 16 channels, very, very low parameters.

    We are talking about—I was told by the industry $4,000 to $20,000 per aircraft for the upgraded flight data recorder on the 737. The FAA press release states that the cost will be $3,067 each to $5,611 each. That is the FAA figure.

    Get the job done. I do not want to see more press releases giving them another 4 years of delay. The airlines state, oh, well, we are doing it, we are doing it. I am asking if this Congressional committee would have public hearings about the most wanted safety items. The Safety Board has spent a great deal of time and research to develop these recommendations.
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    I am not the aeronautical engineer. But I do trust the Safety Board recommendations and I do not think they should be ignored. And 80 percent pass rate is not enough. They should be enacting 100 percent of the recommendations.

    Mr. DUNCAN. Well, I can tell you this, we have held many hearings on this subcommittee into all of the crashes that we have had, we have made many changes over the years from this subcommittee on matters of safety. And we hear frequently and meet frequently with the NTSB and its chairman and its membership and certainly that is a good suggestion that we continue to hold hearings about NTSB recommendations.

    I will ask you a similar question to what I asked Chairman Mineta a few minutes ago. If you had your choice or one particular safety recommendation or safety move that could be made, what is the most important thing that we should be doing that we are not doing now or what is your strongest recommendation?

    Ms. DUNHAM. The number one item on this list, it is just the perfect example for the need for reform. It is not an expensive item. The airlines, one of the documents that I attached in April, I do not have the date in front of me, the airlines actually lied about the cost of installing these upgraded recorders. April of 1996, the airlines lied about it. They said they had to remove the aircraft lavatory to install the updated flight data recorder which the Safety Board disclosed the lavatory did not have to be removed, that it could be done on a normal ''C'' check.

    Some of the airlines say, oh, no, that $4,000 that is wrong. Well, those are some of the antiquated 737s and, yes, it might cost a little bit more but I think we are worth it. And I think an older aircraft should be just as well serviced as a new one.
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    The aircraft, they are light-years ahead of us in Europe. In Europe the 737s, some of them have 300 channels. It is probably the most important tool for accident investigation, it has been number one on the list for years. Barry Valentine, before he left the FAA, I call him the corporate sweetheart because this was his press release the week that he left and he granted them another 4 years of delay.

    And I have requested—as I said, we would like to meet with Jane Garvey and I really want her to do the right thing and I hope that she can do everything to expedite this. You know, the airlines say that they are, let us have public hearings, let us find out. People should know this.

    Mr. DUNCAN. All right, thank you very much.

    Mr. Boyer, you mentioned the chart about airline delays going up and how disastrous that would be or how significant that would be. You also mentioned some enhancements that have been suggested to help reduce airline delays at minimal cost.

    Could you go into those just a little bit and describe what some of those might be?

    Mr. BOYER. They are fully explained in my testimony but these are programs that—and I sound like I am from the airline industry here, but all I am trying to do is make them happy and then we will be happy because they will not be putting pressure on us. But they are the ones who significantly are going to increase demand for capacity in the system and the things they are looking for are things that will reduce their delays, reduce their fuel burns and costs in a system that flies well above what we do in general aviation. They are up in what we call the flight levels are really 29,000 feet.
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    And it is the Mitre Corporation, themselves, this is the consulting organization that has testified before you—that have suggested about four or five simple solutions that the airlines buy into and the airlines are the ones who have said this then would drive down delays.

    Some of those things are Data Link that allows more of the messaging. I think Mike was alluding to that when he was saying there are technologies that could reduce the frequency congestion. And 35 percent of a controller's time is just spent sending an airline to a different frequency because he is moving from one radar screen, so to speak, to another.

    There is Data Link, something that would come out as a message right on the screen, very simple, and technologically possible today. That would be helpful.

    Number two, there are automation procedures for arrivals in busy terminal areas that would be very, very capacity enhancing. And there's collaborative decisionmaking. We are operating under an air traffic control system today. What we need to do is get to an air traffic management system, one in which the pilot and the controllers, side-by-side, are working together to determine the routing but, of course, that means the controller has to have all the facts in front of them and the pilot has to have a lot more knowledge in the airplane. But all of those things. But those are really just three of the four or five smaller programs.

    Now, these programs, Mr. Chairman, are in the hundreds of millions of dollars. It sounds like a lot of money still they are not the billion dollar programs that we have tried and we have come into this room then and talked about how they have failed.
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    Those can all be accomplished within the next 3 to 4 years and they can dramatically, as we show in the graph in our testimony, improve the capacity.

    Mr. DUNCAN. You mentioned to me and I cannot remember exactly when it was, maybe a couple of years ago, that the number of—I know you represent about 340,000 private pilots, if I remember correctly? And that is a little over half the pilots in the country, is that correct?

    Mr. BOYER. That is correct.

    Mr. DUNCAN. But you mentioned to me at one point that you had seen a slight decline in the number of people that are taking flying lessons or becoming pilots. What is the situation now? Is the interest in flying going up? You know, the number of people flying, the air passenger traffic and air cargo seems to be exploding. But what is the situation on that?

    Mr. BOYER. Well, the situation—I am glad you asked—in the late 1970s we were looking at about 138,000 people a year, became student pilots. And these are people that not only fly for recreation or business, they are people that are flying for the airlines and we have got to be concerned about where our future airline pilots come from because the military is not turning out the numbers they were in the past.

    That number in 1996 was 58,000. So, 130,000 in a year down to 58,000, a very dramatic decline.
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    Mr. DUNCAN. A big drop.

    Mr. BOYER. I am pleased to tell you that through some of the industry's efforts, finally getting together and saying, you know, do you realize what you spend on a country club or on your boat or on these other things and here is something you can do with an airplane. But last year, the 1997 numbers are just in, and we have shown an 8 percent increase over the 1996 numbers. So, for the first time in a decade they are going up.

    And yet, at the same time, I speak of the airlines because our members at 340,000 are from airline pilots all the way down to the recreational pilot. As a matter of fact, earlier today Chairman Mineta's son was here who is an airline pilot for TWA and an AOPA member.

    Mr. DUNCAN. Well, I just was curious about that.

    Mr. BOYER. Thank you for asking.

    Mr. DUNCAN. And I am glad to hear that.

    Well, thank you very much. Your testimony has been very helpful and that will conclude this hearing.

    [Whereupon, at 12:55 p.m., the subcommittee adjourned.]

    [Insert here.]
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U.S. House of Representatives,

Subcommittee on Aviation,

Committee Transportation and Infrastructure,

Washington, DC.

    The subcommittee met, pursuant to notice, at 9:30 a.m. in room 2167, Rayburn House Office Building, Hon. John J. Duncan (chairman of the subcommittee) presiding.

    Mr. DUNCAN. We're going to go ahead and call the hearing to order.

    Mr. Lipinski has just arrived in his office from the airport and will be here momentarily, but the staff on the Democratic side has said that it's all right to ahead and proceed and so we will call the subcommittee to order.
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    Let me first thank all of the witnesses for being here this morning. Many of the witnesses have been here with us before, some of them several times before, and we welcome everyone.

    We have a large number of witnesses, so I'm going to be very brief in my comments this morning.

    This is our third hearing in the past few weeks dealing with programs that will be considered in this year's FAA reauthorization package. We will have another hearing next week and then we have about 3 or 4 days of hearings scheduled in the latter part of April and the beginning of May which should give the subcommittee ample information to put together an outstanding FAA reauthorization bill.

    We look forward to hearing from our witnesses who represent a number of airports around the country.

    In 1997, the FAA tells us that 640 million people flew in the United States. By even the most conservative projections, the FAA and others predict that we will have almost 1 billion passengers flying each year by the year 2007. This is a tremendous increase that is scheduled to occur over the next 9 or 10 years. Obviously, we are going to have to invest in our airports to accommodate this enormous growth in air passenger traffic.

    In most places, it is politically impossible to build new airports, so we need to make sure that the airports we have are the best they can possibly be to accommodate the demand and the great increase that everyone knows is coming. We have to prepare for the future in aviation because almost everything that happens in this country depends, at least in part or in some significant way, on our aviation system.
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    As I mentioned yesterday, this committee strongly supports taking the Aviation Trust Fund off budget. In our view, if the traveling public is going to pay more in taxes, then they should see a corresponding increase in aviation spending and we can do this if the trust funds are off budget.

    We, of course, have an obligation to make sure that this money is spent wisely, conservatively, prudently and frugally. We have proposed a fiscal year 1999 authorization level for the FAA that is $1.2 billion more than what was appropriated during this fiscal year.

    It's accurate to say that the FAA, as I mentioned yesterday, received one of its largest increases ever last year and will again this year, so it certainly won't be for lack of funds that the FAA is going to do its job. We are considering now major changes in the way the FAA does certain things so that hopefully, these programs will continue to improve over time.

    Although the AIP program is currently funded at $1.7 billion, we have proposed an AIP authorization level for fiscal year 1999 of $2.3 billion. It's fair to say that we strongly support improving the capacity of our Nation's airports.

    Obviously, airport needs are not uniform across the Nation. Smaller airports depend heavily on AIP funds, while large airports primarily can generate substantial revenues from other sources. For example, at the Nation's 71 largest airports, AIP represents 10 percent of their overall funding source. At the remaining 3,233 smaller airports, the AIP represents approximately 50 percent or more of their funding.

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    I believe that we've done a pretty good job in the past in trying to fairly distribute these AIP funds. Airports tell us that they need $10 billion each year to keep up with the tremendous growth in traffic. I know we want to help our Nation's airports maintain a strong, vibrant and safe aviation system.

    Of course we look forward to hearing from our witnesses today.

    At this time, I will recognize other members. Mr. Pease was here first. Mr. Pease, do you have a statement at this time?

    Mr. PEASE. Mr. Chairman, I do not have an opening statement, but I do want to express my gratitude to you and to the panel for a hearing that I'm looking forward to very much.

    I will tell you in advance I'm going to be cutting back and forth to another hearing, but I'm grateful for this opportunity.

    Mr. DUNCAN. Mr. Metcalf?

    Mr. METCALF. No statement.

    Mr. DUNCAN. Dr. Cooksey?

    Mr. COOKSEY. No, thank you.

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    Mr. DUNCAN. Thank you very much.

    [The prepared statements of Mr. Lipinski, Ms. Brown, and Mr. Costello follow:]

    [Insert here.]

    Mr. DUNCAN.We will go ahead and proceed with the first panel. The first panel consists of Mr. Gerald L. Dillingham, Associate Director, Transportation Issues, U.S. General Accounting Office, accompanied by Mr. Paul Aussendorf, Senior Analyst, General Accounting Office. We also are pleased to have Mr. Robert Wigington, Executive Vice President, Airports Council International, North America; Mr. Charles M. Barclay, President, American Association of Airport Executives; and Mr. Leonard L. Griggs, Jr., Director of Airports, City of St. Louis.

    Gentlemen, we are pleased to have each of you here. We always proceed in the order listed on the call of the hearing. That means, Mr. Dillingham, we will proceed with your testimony first. You may begin.

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    Mr. DILLINGHAM. Thank you, Mr. Chairman.

    Since the AIP was last reauthorized in 1996, this committee has asked us to study various aspects of airport financing. Last year, our report to you reconciled the various 5-year cost estimates for planned airport development that were presented by the FAA, airports and the airlines. Our testimony today focuses on the potential sources of money to pay for those planned developments.

    We would like to address three specific questions and use the slide presentation to illustrate the results of our research. Our questions are: how much are airports spending on capital development and where is the money coming from; the second question is, if current funding levels continue, will they be sufficient to meet the airports' development plans; and third, what effect will various proposals to increase funding have on the airports' ability to carry out their development plans?

    In the first series of slides, we will be looking at the overall funding situation for the 3,300 airports that make up the National System. For this analysis, we compared the amount of money that was available for development in 1996 from the principal sources of such funding with an annual average of planned development costs for the next 5 years.

    As you can see, AIP funds provided about $1.4 billion for airport development in 1996. PFCs provided another $1.1 billion. This figure represents 287 commercial service airports or slightly more than half of the airports that are eligible to collect PFCs.

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    State grants added another $285 million to the fund available for development. Of that $285 million, slightly more than one-third of that money went to large and medium hubs. The remaining two-thirds went to smaller airports.

    The single largest category of airport funding, about 58 percent of the total, was tax exempt bonds, most of which were secured by an airport's future revenues. In addition, there were about $414 million in special facility bonds. These bonds are issued by airport sponsors but are secured by expected revenues from the facility that is to be constructed rather than by general airport revenues.

    Lastly, we estimated that there was about $153 million in airport revenues available for development in 1996. These were the funds that were available after the airports paid their operating and other expenses.

    Mr. Chairman, having examined the various sources and amounts of funds, I'd like to turn now to a comparison of these figures with the estimated cost of planned airport development.

    For the National System, the projects that are planned to maintain the current infrastructure to meet safety, security and environmental requirements would cost an average of about $1.4 billion. These are FAA's highest priority projects.

    To fund development that would address other high priority projects, such as adding capacity, would add another $1.4 billion. The remaining planned development that is eligible for AIP funding, such as bringing airports up to FAA design standards, would add a yearly average of about $3.3 billion to the cost estimate. This would leave a yearly average of about $3.9 billion for planned development that would not be eligible for Federal funding, such as construction of a parking garage.
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    When a comparison is made between the total amount of funds available in 1996, with the average annual cost of planned development, you can see that the average annual cost exceeds the 1996 available funding by about $3 billion. We believe the difference between the $10 billion in planned development and the $7 billion in available funding is important, but perhaps not as telling as the disparity between large and smaller airports' capacity to finance their development.

    When you look at the same data for large and medium hubs only, you see there was about $5.6 billion of available funding in 1996. As this slide shows, for those same airports, they have an estimate of over $7 billion for planned development.

    When you examine the situation for smaller airports, including small hubs, non-hubs, other commercial service and GA airports, you see the available funds total about $1.5 billion from all sources

    This next slide shows you that their average annual cost of planned development totals nearly $3 billion or almost twice as much as the funds that were available in 1996. This slide shows that the difference between the available funding and planned development is more significant for the smaller airports.

    As you can see, smaller airports' 1996 funding would cover about 50 percent of their planned development as compared to larger airport funding which covers about 80 percent of their planned development.

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    Turning to question three, regarding ways and means to increase airport funding, several proposals have emerged in recent years, including increasing the size of the AIP, raising or eliminating the ceiling for PFCs, and better leveraging of existing funds. These proposals all have merit, but vary in the degree to which they help specific types of airports.

    For example, an increase in AIP would help smaller airports more than larger ones because AIP represents a greater proportion of small airports' funding. Also, if the total amount of AIP funds are increased, a greater proportion of those funds would go to smaller airports.

    Regarding PFCs, if the choice is to increase PFC funding, it would benefit large airports almost exclusively because they provide service to approximately 90 percent of the flying public. Therefore, to correct the imbalance between the financial capacity of larger and smaller airports, an increase in PFCs would need to be coupled with reallocating AIP funds in favor of smaller airports, as well as considering other measures designed to help smaller airports.

    FAA is currently testing various innovative financing mechanisms, but because they're still in their early stages, the results are inconclusive.

    We would suggest that another possibility is to allow FAA the flexibility to provide AIP grants to States for a revolving fund that would provide loans to smaller airports. We believe this may be an option worthy of consideration.

    Thank you, Mr. Chairman. This concludes our oral statement.
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    Mr. DUNCAN. Thank you very much, Mr. Dillingham.

    We have been joined by several other members, Mr. Lipinski, Mr. Boswell and Ms. Johnson, and several others. I was going to let Mr. Lipinski make a statement but he slipped out again, but he'll be back in just a minute. Does anyone else have an opening statement they wish to make at this time?

    [No response.]

    Mr. DUNCAN. If not, we'll proceed next with Mr. Robert Wigington.

    Mr. WIGINGTON. Thank you, Mr. Chairman.

    Good morning to you and the subcommittee members.

    I'm very pleased to be here today with Chip Barclay from AAAE so we can present our joint testimony on AIP reauthorization.

    As you know, for most of the last 2 years, we have spent a lot of money and a lot of time analyzing airport funding needs. You heard the work GAO has done, which has been very exhaustive, very thorough and very good work.

    What we learned after this exhaustive research is exactly what airports and this committee have been saying for many years, that airport capital development funding needs throughout the United States are around $10 billion per year. We also know that when you add up all the funding available from current Federal and local sources, we come no where near to meeting those needs and the GAO slides pretty well demonstrate that.
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    We believe now is the time for Congress to end the debate over airport funding needs and to get down to the business of meeting them. It should no longer be a question of who is right or wrong, but how can we do what is right for airports, for air travelers and for the communities and businesses that depend on a healthy, growing and efficient airport system?

    We have some charts I'd like to talk a little bit about that emphasize how important airports are to their communities and the businesses that operate at and around airports. Airports are economic engines for those communities that they serve. An investment in airports generates tremendous economic benefits—new business investment and opportunities for airlines and other companies that serve or depend on airports, to facilitate travel and tourism, and to create jobs and tax revenues for local and State governments, and for the Federal Government.

    Each and every day, U.S. airports generate over $85 million in tax dollars, more than $1 billion of new investment in the national economy, and over $425 million in salaries to employees and airport-related jobs.

    As you look at the chart on the right, the 1997 economic impact report we prepared, you'll see the results which show that airports nationwide generate $400 billion in economic activity. They also create approximately 1.6 million jobs directly at the airports and another 4.2 million jobs in the communities they serve. These jobs create more than $155 billion in salary and wages to support the livelihoods of the individuals and their families who work at airports or airport-related businesses. And, more than $31 billion in taxes is generated for local, State and Federal governments. That is today's benefits from airports.
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    Mr. Chairman, you cited some of the FAA forecasts of growth in the aviation industry and last week we had the FAA's aviation forecast which reveals that there is tremendous growth potential for the aviation industry that we must be prepared to meet with improved and expanded airport facilities and capacity.

    At that conference, it was noted that between 1997 and 2009, air carrier operations are forecast to grow by 30 percent, and nearly 24 percent for air taxis and commuters. You cited statistics of the growth in passengers. I'd like to note that the 500 million passengers who were flying when PFCs first came into use in 1992 now number 630 million. According to FAA, that will grow to some 1 billion people over the next 10 years.

    Accommodating that level of activity and growth would require a capacity increase equivalent to that handled today at the top 30 US airports, or would require building 10 new Dallas-Fort Worth, Atlanta, or Chicago airports.

    With that kind of growth, we can expect airport economic benefits to grow as well. Our charts point that out. Today's $400 million economic contribution from airports could grow to more than $600 million during that period, with the number of jobs increasing from 5.8 million to nearly 10 million.

    That will only happen if we make the increased investments now and into the future to accommodate that growth. We believe the AIP program is key to that growth potential and that an annual Federal investment at the authorized level you've talked about—the current authorized level of $2.3 billion is appropriate, absolutely required and should absolutely be funded by Congress once it is authorized.
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    As you know, we also believe the cap on the PFC must be eliminated so that airports have more flexibility, more independence, more ability at the local level to meet the needs that clearly cannot be met through the AIP program itself. We think that kind of return investment through AIP and PFCs is a tremendous return by anyone's standard.

    Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you very much, Mr. Wigington.

    Next, we will hear from Mr. Charles M. Barclay of the American Association of Airport Executives. Mr. Barclay?

    Mr. BARCLAY. Thank you, Mr. Chairman, and thank you for putting up with yet another appearance on this topic by me.

    As you saw from the GAO presentation, AIP is one of a number of sources of airport funding but it's a very critical one. As you're going to be hearing from other members of the panels, it's a critical one for all airports, both large and small, but it is particularly critical for the smallest airports in the systems because it represents finance of last resort. The smallest airports don't have some of the other opportunities that larger airports with a major market have to fill in holes in the AIP program.

    I think to understand AIP. The committee and I know the Chairman and many of the committee members do, but there needs to be an understanding of what our airport system looks like. It's a heavily concentrated system. The wealth of this system is at the top at a very few airports. Eighty percent of the traffic in the country, the passengers, travel between the top 50 airports. Ninety percent travel between the top 75 airports.
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    We have 440 airports with air traffic control towers, about 550 that get air carrier service, and there are about 3,300 airports that are eligible for Federal funding.

    Without a system like AIP that takes a look at airport development and capital needs on a systemwide basis, if you only take a look at these needs locally, you're not going to have a national network of airports. You'll only have airports headquartered around the major metropolitan areas in the country.

    Most studies have shown that there's only about 100 airports that could support both their capital and operating needs by themselves locally. So the systemwide method of financing is absolutely essential if we believe in a network. And it's more than just generosity that causes us to want to do some reallocation of funding in this system for capital needs.

    For example, 2 years ago, Aberdeen, South Dakota had their runway break up due to a frost heave. It was a $7 million project that they didn't have to replace that runway. That money was taken out of the trust fund, so the system made a $7 million investment at Aberdeen even though there's only 26,000 passengers enplaning a year. If you take those 26,000 times 2 (in and out,) times the average one-way fare of $143, multiply that times the 20-year useful life of that investment in a new runway, Aberdeen is going to put $150 million into the system for that $7 million investment before you even start calculating growth in traffic or any general inflation in the economy. So these are wise economic vestments we're talking about making at both large and small airports.

    The needs have been gone over very well by the GAO report, so I won't repeat those. It's important to understand that compared to the authorized levels of this committee, since 1992, the appropriations have been $3.6 billion less than the authorized levels. So we've got a lot of catching up to do.
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    On average, through the nineties, we've been underinvesting by nearly 40 percent of the amount of money going into the system versus the needs for capital. The year that the GAO demonstrated, 1996, that was 30 percent underinvested, that lack of $3 billion on a $10 billion need.

    The recent cutbacks in the system may make sense in terms of the budgetary pressures through the 1990s that airports and others have had to live with. The airlines were in terrible shape in the early 1990s and that caused a lot of cutbacks, so airports have clearly shared in the pain the system has been through, but we're here today looking at some new trends and some new factors.

    One, we're debating a budget surplus of the Federal Government. Second, the passenger growth has already been noted by the Chairman and others. Between now and 2005, just in 7 years, we're looking at looking at a 50 percent growth in passengers, from 600 million to 900 million passengers and it takes us that long to build anything.

    If we don't start building right now for the passengers that are going to be here, the 50 percent more passengers, in 2005 we're not going to have the facilities to handle that growth.

    Here's just one other example of the reversal of the airlines' fortunes. If you take a look at the price per gallon of fuel in 1991, January 1991 versus January of 1998, fuel alone for the airlines is down 44 percent. That represents an annual savings of nearly $5 billion for the airlines versus what they were paying for fuel in 1991.
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    Airports have shared in the tough times and airports need to share in the good times. We need to do some catching up on building these facilities, so we're here asking the committee to continue the current level of authorizations at $2.35 billion. We need to go to the appropriators and try to get those appropriated levels up.

    Finally, to repeat our request of last week, we need to lift the cap on the PFC and link to that a shift of funding to the smaller airports to accommodate the numbers you saw from GAO and, more importantly, to accommodate the needs of our economy to have a high capacity, high technology airport and air traffic control system.

    Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you very much, Mr. Barclay.

    Before we go to Mr. Griggs, I'm going to call on Mr. Lipinski for any statement he wishes to make.

    Mr. LIPINSKI. I thank the Chairman, very much. I apologize to all you folks for being tardy this morning, but I had a good reason for it, but I'll go into that another time.

    Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Mr. Lipinski.
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    I don't think I called on Ms. Millender-McDonald. Do you have any statement?

    Ms. MILLENDER-MCDONALD. Mr. Chairman, thank you so much.

    The only thing I wanted to go back to Mr. Barclay was the $2.35 billion. What did you say that would be for, sir?

    Mr. BARCLAY. That's the current authorized level for the Airport Improvement Program that's in the law for this year. We're just asking for a continuation of that.


    Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you.

    Next, we're honored to have Mr. Leonard Griggs, who is the Director of Airports for the City of St. Louis.

    Mr. GRIGGS. As you know, I'm Len Griggs from St. Louis. I represent an airport which is a major hub for TWA. We handled over 27 million people last year and are looking to 29 million people this year. When you talk about contributions, this airport is worth $5 billion to our local economy.
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    I also serve as a member of the National Civil Aviation Review Commission and I'd like to focus a little bit on an airport program that was recommended by Norman Mineta yesterday. I'd like to focus on four things today.

    Transportation funding from the Congress must be balanced between surface and air modes. I was very pleased to note the Senate last week authorized a total of $214 billion for highway/mass transit programs over the next 6 years. In addition, the House Speaker announced the House Republican leadership will roughly match the Senate-passed bill.

    These funds represent $60 billion or a 40 percent increase over the prior 6-year-period that is needed to upgrade highways, transit and busway systems. However, I hope the Congress, through its authorization, budget and appropriations process, can also assure that the FAA's aviation programs will be adequately funded in light of the substantial surface transportation increases.

    Chip hit the nail on the head. If Chairman Shuster's ''off-budget'' proposal were accepted by the Senate, civil aviation would also receive adequate funding levels. I worry, however, that if your ''off-budget'' approach is not adopted, the extra funds being authorized this year for surface transportation could result in sharp reductions and no increases through the appropriations processes for equally important FAA programs.

    Again, the contrast between the Congressional approaches to the surface and air is inordinately sharp: 40 percent increased planned for highway and transit infrastructure is way above the very modest increases that the FAA program levels are assumed under the balanced budget agreement.
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    Similarly, aviation programs have been authorized in recent years for 1- or 2-year periods. I hope civil aviation can reach the same long-term financing stability that a 6-year AIP reauthorization could provide, as it has for the surface transportation through the ISTEA process.

    Second, Congress should carefully reconsider all the NCARC Commission recommendations, including those relating to airport development. Attached to my testimony is an excerpt from the final report on this subject. As you can see, the Commission supports a minimum $2 billion annual AIP program.

    In addition, there was an agreement that an increase in the current $3 PFC facility charge should be considered by Congress even though Commission members disagreed on the type of PFC project approval that would be appropriate for projects above today's $3 PFC level and whether the PFC level should be increased this year.

    Personally, I support the position of the two airport associations that Congress should approve a higher PFC level with no change in the process in which the airlines are consulted in great detail. Airlines must not be able to veto any PFC project that is approved by the FAA.

    In St. Louis, we have used existing PFC authority for noise mitigation projects and constructing 12 new gates that will be used by Southwest Airlines to offer low fare service to passengers coming through St. Louis.

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    In my view, PFC funding should be used whenever possible to equalize a competitive playing field between the airlines serving our airports and to help improve and upgrade airfield capacity.

    I understand Administrator Garvey testified yesterday that the Administration is reviewing whether to support a consensual increase in the current $3 PFC program. Mr. Chairman, to me, this is a disappointing announcement. If there is consent by the airlines serving St. Louis to pay for capital investment, St. Louis wouldn't need an increased PFC ceiling.

    However, projects which the airlines agree to can be funded under existing use and lease agreements with the airlines. Further consensual increase would eliminate the possibility of using PFC funds to provide new gates for airline competition.

    Third, larger airports need greater access to AIP discretionary funding for major airfield capacity projects. I urge that the current AIP statute be amended to allow more discretionary funds to be used for airport capacity projects as the level of AIP appropriation increases.

    In St. Louis, for example, we are applying this year for a $200 million letter of intent over a 10-year period to help finance a new runway to allow us to shoot simultaneous dual approaches. That, today, is our Achilles heel.

    It is estimated by the FAA alone that between the years 2005 and 2015, we will save $1.9 billion in St. Louis on delay costs and across the Nation, $5.1 billion, by building this additional runway capacity.
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    The total cost of the new 9,000 foot runway primarily for air carrier operations is over $800 million. We plan to devote our AIP entitlement funds and a substantial share of our $3 PFC current capability. We also hope as the FAA approaches a Record of Decision on our master plan, that this pending LOI application will be approved.

    Fourth, if the current PFC ceiling is statutorily increased, Congress should simplify the AIP funding programs. I recognize the current AIP statute, which has not been substantially re-enacted since 1982, is the result of a successive series of Congressional modifications.

    As you may know, I served as the Assistant Administrator for the FAA during the years 1989-1993. I was inordinately lucky that I had $1.9 billion per year in AIP obligatory authority in order to make grants across this country. I can make a case that if pressures on some statutory formulas abate because of an increased ceiling on PFC, the Congress should consider structurally simplifying the AIP program.

    If the FAA were to be given greater flexibility to make AIP grants, overall national objectives could probably be better achieved with FAA getting more bang for the buck. In this regard, I am sympathetic to the kinds of changes to the AIP program that was proposed to you last week by the ATA.

    As I understand the ATA proposal, it would place greater emphasis on a benefit cost analysis. I hope Congress can accommodate these very competitive and constructive concepts of the ATA if the PFC ceiling is increased.
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    Again, I want to thank you for this opportunity and I'd like to echo what Chip Barclay had to say. We at the bigger airports are in a little better position than the smaller airports where I can do some things that they cannot do. They absolutely need AIP funding in order to exist. I represent an airport that knows exactly what a system of airports means to our passengers.

    Thank you very much for the chance to appear.

    Mr. DUNCAN. I'm glad that you mentioned that about the system and the importance to a large airport like yours of the smaller airports because they all feed into each other.

    I started both rounds of questioning yesterday, so I'm going to go last today. I'm going to go first to Mr. Metcalf. You have no questions at this time?

    Mr. METCALF. None.

    Mr. DUNCAN. Mr. Boswell?

    Mr. BOSWELL. No.

    Mr. DUNCAN. Ms. Johnson?

    Ms. JOHNSON. Thank you very much, Mr. Chairman.
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    I'd like to submit a question for Mr. Wigington and Mr. Barclay to submit their responses later.

    The other thing I'd like to ask is how much attention is being given to Year 2000 as relates to airport safety and equipment? Anybody or all?

    Mr. BARCLAY. A great deal and like many businesses, our members have just been, in the past year, learning that this doesn't affect just their computer systems. But, fire trucks with embedded processors can shutdown, elevators, escalators, HVAC, anything that has an embedded processor in it with the wrong kind of programming.

    If you have things like boarding bridges that have mechanicals that have processors in them and they've been maintained over the years, you may not even know what is in there now because you don't know what the maintenance crews may have used in terms of new features.

    It's a big job and the airports are out there taking it seriously. Both ACI and AAAE and ATA all have committees working on this. It is one that is very serious for FAA that controls all the navigational equipment for the system, but we are taking it very seriously and the members are working hard on it.

    Ms. JOHNSON. Have you had any reason to be concerned about hackers?

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    Mr. BARCLAY. Hackers?

    Ms. JOHNSON. Hackers.

    Mr. BARCLAY. I haven't heard about hackers getting into airport systems. In fact, we've been finding, AAAE has a very active web site—we get three million hits a year on our web site with only 4,500 members, so we really encourage members to get on there. We're finding a lot of our members get on from home because many cities have not even gotten access to the Internet because of the concerns over security.

    To answer your question directly, I haven't heard much about hackers coming into airport systems and doing something with those. The airport systems don't have control over the critical safety items like NAVAIDs.

    Mr. DILLINGHAM. Ms. Johnson, in our work with the DOTIG, we understand that they are about to begin a study to look at the very issue that you raised about the preparation of aircraft and airports for the Year 2000 problem.

    Ms. JOHNSON. Thank you very much.

    Mr. GRIGGS. Madam Congresswoman, we are working with the airlines and we have a RFQ and a RFP on the street and we hope to have all our systems at the airport upgraded to meet that deadline by July 1999 because this is an inordinately important question for all of us.

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    Ms. JOHNSON. Thank you very much.

    Mr. DUNCAN. Thank you, Ms. Johnson.

    Mr. Pease?

    Mr. PEASE. Thank you, Mr. Chairman.

    Mr. Dillingham, I appreciated very much your presentation and your efforts at trying to find more creative ways to be of assistance, particularly to the smaller airports.

    I took note of your discussion, I realize not yet in the form of a proposal, for grants to States, I assume from the Airport Improvement Program, to set up State revolving loan funds. Could you explain that a bit more in this context in particular?

    I also noted in one of your charts that those airports were losing money on operating expenses. How are you going to pay back a loan if you're losing money operating?

    Mr. DILLINGHAM. Mr. Pease, that's included in our last report. It's one of the recommendations that we are putting forward as one of the things that might be looked at as a way to enhance funding. Let Mr. Aussendorf, my colleague, speak to that. He's been working in that area for quite some time.

    Mr. AUSSENDORF. I think what we had envisioned with the revolving fund is just another innovative means, another tool for FAA to provide grants, as you say, from the AIP to States. I think initially it would likely go through the State Block Grant States of which there are nine right now to give them more latitude to provide loans to airports rather than straight up grants.
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    It's true that the universe of those airports that are in a position of being able to pay back those loans is not a large universe. They are perhaps the smaller hub airports, some of the nonhub airports. It could be for projects that have a more commercial orientation where they do generate funds to pay it back.

    In the State of Florida, they already have a revolving fund; it's not funded through AIP. But eventually, the airports hope to repay the loans from reimbursements through the AIP. In that way, it's like providing the money up front and getting the project going quicker than if the airport had to wait several years for the AIP grant to become available.

    So I guess we're not envisioning this as a large program. It's just another innovative finance technique along with flexible shares and some of the other concepts that FAA is testing right now.

    Mr. PEASE. I appreciate that. I guess I'd be curious to know if the airports have had a chance to look at this and if they have any thoughts on it also?

    Mr. BARCLAY. Mr. Pease, I'd like to say that you hit the nail on the head. There have been a number of proposals for revolving loan funds. Frankly, there's already a revolving loan fund for airports that is called Wall Street and the bond market.

    A revolving loan fund set up by AIP grants at a State level might have the advantage of lower interest rates, but if you have the ability to pay back loans now for capital facilities, you can get the money, you just might not get as much of it if you have a higher interest rate.
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    You can make some differences on the margins but the airports like the Aberdeen example simply don't have the wherewithal to borrow money and then pay it back over any reasonable time period. So the revolving loan fund is not a broad based solution to the problems in the system for the smaller airports.

    Mr. WIGINGTON. If I could add, Mr. Pease, we have too looked at revolving loan fund type ideas and it all comes down to using existing funds in a way that do not maximize the dollars that airports need. I think we have a grave concern about converting what should be grants particularly for the smaller airports that don't have the debt capacity to repay loans and turn that into a State loan program.

    As you saw from the chart, the bulk of funding from airports comes from Federal and local sources. Airport development really is driven by local needs. There is an appropriate role for the States to play and to provide assistance, but that doesn't add more money to the system.

    You and I and everybody else probably gets five or six offers in the mail every day from credit card companies to set up a new line of credit or to borrow some money. That's all well and good, but if you don't have any extra income to pay it back, it doesn't do you much good.

    Mr. GRIGGS. I would like to also echo that and support what Chip Barclay said and what my other contemporary said. The small airports absolutely need Federal grant programs. They do not have the capability to go and take out loans like I do.
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    The other thing that bothers me is if you turn Federal Aviation funds over to State funds, I would hate to see them commingled and lost in the channel somewhere for other than aviation projects. The States vary in their capability to handle and manage those kinds of funds. So I think it's something the Congress should be inordinately concerned about.

    Mr. DILLINGHAM. Mr. Pease, I'd just like to say, just to reiterate, that what we are offering are options to be considered. We certainly aren't seeing this as a panacea, it's along with other options that FAA is considering at this point in time.

    Mr. PEASE. Thank you, Mr. Chairman.

    Thank you, members of the panel.

    Mr. DUNCAN. Thank you.

    Ms. Millender-McDonald?

    Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman.

    Mr. Griggs, you mentioned last week's Senate passage of the ISTEA bill had $60 billion, a 40 percent increase, and you are also mentioning that hopefully the House passes a similar bill so that adequate funding can go to FAA. What is adequate funding for you?

    Mr. GRIGGS. To me, adequate funding represents—I'd like to see what is authorized, $2.35 billion, but I think as the Commission proposed, $2 billion is an absolute bottom line.
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    My concern is that it's very difficult for the FAA to administer a grant program shooting at a moving target. When you have an FAA that's only authorized for 1 to 2 years, for example, it is very, very difficult, almost impossible to have a meaningful LOI program.

    Therefore, if you could have an AIP program, if you could have an FAA authorization program that can match the time tenure of the Federal Highway Program, I'd think it would result in a lot better planning and a lot better formulation of long-term plans to support airport needs.

    I guess what I'm really saying is it's fine to have a magnificent highway program and the best highways in the world, but if it passes the airport which has fallen into decay, what have you gotten out of it?

    Ms. MILLENDER-MCDONALD. I couldn't agree with you more on that.

    Mr. Dillingham, you did have quite an impressive layout today. What you indicated in terms of the $1.4 billion for airport improvement, have you talked with the Los Angeles Airport authorities? Do they know about the layout that you have here?

    Mr. DILLINGHAM. In terms of the way we have calculated the needs?

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    Mr. DILLINGHAM. We haven't talked to them directly, but as a general principle, our work is in fact given to the various airport associations and it's transmitted that way. We also present our work at various conferences and so forth, but we have not gone directly to LAX.


    Mr. AUSSENDORF. If I can just quickly add, we did speak with Mr. Driscoll a couple of years ago in connection with some work looking at privatization options. The numbers we have here, the $10 billion, reflects approved master plans, including Los Angeles', though they are currently looking at a much larger master plan now.

    Ms. MILLENDER-MCDONALD. Indeed we do.

    Mr. AUSSENDORF. So the full amount of that is not fully reflected in those numbers because Los Angeles is still working on finalizing them.

    Ms. MILLENDER-MCDONALD. Very well,

    Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Ms. Millender-McDonald.

    Mr. Bass?
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    Mr. BASS. No questions.

    Mr. DUNCAN. Dr. Cooksey?

    Mr. COOKSEY. No questions. I would comment, Mr. Griggs, that I'm familiar with your airport. When I was in the Air Force, we used to go in there and pick up new F-4s, RF-4s and that was at Lambert Field. It was a great airport then. Of course I was a lot younger then. Do you still ship out F-16s or 15s out of there?

    Mr. GRIGGS. I was a lot younger then myself. I was flying F-100s at that time. We now have been replaced by Boeing Aircraft and produce the advanced version of the F-18 and the F-15.

    Mr. COOKSEY. They're at the old McDonnell plant?

    Mr. GRIGGS. Yes, sir. I'm happy that you brought it up because the sign, unfortunately, is coming down which has a lot of historical memory for all of us. The McDonnell sign, as I'm sitting here today, is being replaced with a new Boeing sign, but I will tell you one thing, Congressman, that beats the devil out of a vacant or for rent sign.

    Mr. COOKSEY. That's right. McDonnell had a great tradition in St. Louis and contributed a lot to the Air Force. As you know, the F-4 was first selected by the Navy. Occasionally, they get things right. Air Force picked the 104 which was not a great airplane but that was a great airplane that McDonnell built.
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    Mr. GRIGGS. The only thing we could do with the F-104 was I could beat you at 85,000 feet.

    Mr. COOKSEY. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Dr. Cooksey.

    Mr. Lipinski?

    Mr. LIPINSKI. Thank you, Mr. Chairman.

    I thank all you gentlemen for being here once again. I really don't have too much to say. We had a hearing where we talked about this rather extensively.

    It just seems to me that when we talk about the PFC, which I am all in favor of increasing and which we are working on, but I have no idea if we will be successful in that or not, but it seems like the PFC is important to the large airports and the AIP funding is very important to the smaller airports, the nonhub airports.

    Do any of you gentlemen who know a great deal about aviation and the aviation business ever come up with any kind of creative ideas or thoughts on how we might be able to utilize the PFC, but maybe there could be some spinoff from the PFC that might be beneficial to smaller or nonhub airports?

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    Even though I'm a great supporter of the PFC, and I have been since we put it back in, it seems to me that in order to increase, you have resistance not only from the airlines, which we know, but you also have resistance from the smaller airports, nonhub airports because they feel like the big airports are being taken care of by the PFC, but we're still stuck with the appropriation process each and every year.

    When you take potentially so many people who might represent the larger airports out of the process, there's less and less pressure being exerted upon the Appropriations Committee for money for the AIP program such as I'm interested in Midway Airport, I'm interested in O-Hare Airport, they both have PFCs. If I could increase that PFC at those two airports, I'm not going to be that concerned about trying to get more money out of the AIP, funding out of the Appropriations Committee.

    Does anyone here on this panel have any real ideas on how we might get around that particular problem, thereby helping the large airports, the nonhub airports and the small airports? I await your wisdom.

    Mr. DILLINGHAM. Mr. Lipinski, I don't guarantee it to be wisdom, but I'll give it a shot.

    There is already up to a 50 percent return of entitlements required if an airport is collecting PFCs, and there is the thought that if the $3 limit on PFCs is raised, you may, in turn, require the return of 100 percent of entitlements and have that directed towards small airports.

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    Mr. LIPINSKI. Now, since we've had the PFC, has that 50 percent return winding up going to the nonhub airports and that amount going to the nonhub airports and the smaller airports or is the appropriations process in any way being diminished and there is the 50 percent PFC return going there, but the Appropriations Committee is not appropriating as much each year?

    Mr. DILLINGHAM. By and large, it is going back to the small airports.

    Mr. LIPINSKI. Yes, but is the appropriations process itself going down each year because of that or is it staying level or is it increasing at a rate that it would have increased to accommodate the smaller, nonhub airports if there wasn't a PFC payback on it?

    Mr. BARCLAY. Congressman, if I could jump in. I travel around the country to chapter meetings with our smaller airports and for the reason that you've stated, they often don't believe me when I tell them that the big airports have given up half their entitlement monies and it's gone into something this committee created called the Small Airport Fund.

    If you cut AIP from 1.9 to 1.45, the small airports can't feel it because the total amount of money available to them wound up less in the mid-1990s, even though they were getting more than they would have gotten under a 1.45 due to the payback provision.

    What you have stated is exactly the thought process that ACI and AAAE have gone through in trying to devise a plan that has all airports' interests involved. That is to keep the large airports in the program and interested in things like the appropriations levels because they're still eligible for discretionary grants and LOIs, they wouldn't be out of the program entirely; two, to have this process where as PFCs go up, small airports get a larger portion of the AIP fund, so that we link those two things together in our proposal.
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    That way, there's something for everybody in a system sense and there's a reason for everybody to lobby together on it.

    Mr. LIPINSKI. I'm sure there been an argument made by some of the appropriators that they have simply been cutting the appropriation because of the belt-tightening and the desire to reach a balanced budget overall with the Federal Government.

    Have there been arguments put forward and is there any evidence that any of you could come up with that the decrease in AIP funding from the Appropriations Committee has really been a direct result of the feedback on the PFC money?

    Mr. GRIGGS. I was the Assistant Administrator when the PFC law was written and I worked with these two gentlemen in formulating that. The whole thesis and premise of it was that the PFC would be the second stream of money to finance airport projects.

    Every big airport agreed to it and how we got a compromise was that the larger airports would give up one-half of their AIP funding to go to small airports. I still think that was the right conclusion.

    The third stream of money that materializes was the PFC could be used as a PFC-backed bond. It took a long time for the buying market to recognize the PFC was a stable floor of money because, as you well know, the regulation has it written that the Secretary of Transportation can terminate the PFC flow.

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    I think something else is, and I agree with Chip, I'm more than willing to give up my share and 50 percent of it, but also realize, for example, at Lambert Airport, my passengers pay and infuse into roughly $120 million per year into the Aviation Trust Fund. So I would still like to see large airports, while we're willing to give it up, still be qualified candidates for the LOI Program because discretionary money has got to be used to build some of these things.

    Mr. LIPINSKI. I understand your point and I appreciate that information but perhaps I didn't state my question very well.

    What I was looking for were some arguments from you gentlemen stating that the appropriators have decreased the amount of money they've been appropriating for the AIP because of the feedback and the 50 percent reduction in AIP funding to the large airports that have PFCs. I was looking for some arguments to make in behalf of that?

    Mr. GRIGGS. I've never heard that argument substantiated. I guess I can only speak for myself, but I'll always view the cutting end of appropriations as being an attempt to mask the deficit and cover that.

    If money is going to be collected through the ticket tax or whatever appropriation for aviation uses, it should be used for that. That's why we as a commission recommended an AIP level of $2 billion is absolutely the minimum to maintain this Nation's infrastructure.

    Mr. LIPINSKI. So would you recommend that all this money that's collected in regards to aviation ticket tax, eventually in the near run we're going to change it all to a user fee and when it's all changed to a user fee, then Mr. Chairman, this committee will have sole discretion over where that money is going to be utilized.
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    I yield back the balance of my time.

    Mr. GRIGGS. I think I'll leave that one alone.

    Mr. DUNCAN. Thank you, Mr. Lipinski.

    Ms. Brown and Vice Chairman Blunt have just come in. Ms. Brown, do you have a statement or any questions?


    Mr. DUNCAN. Mr. Blunt?

    Mr. BLUNT. Thank you, Mr. Chairman.

    I'll run the risk of a question or two maybe being asked and if they have been, I'll read the record.

    On the GAO studies that show we have a shortfall in construction, about $3 billion, do those studies also give an account of how many of those projects wouldn't be fundable under these programs, the construction needs out there that wouldn't meet the formula or the criteria to be funded under these programs? What does that amount to?

    Mr. DILLINGHAM. In the aggregate, it's about $4 billion, but we weren't able to determine specific projects.
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    Mr. BLUNT. I guess what I'm asking there is, if the shortfall is $3 billion and the aggregate of what you need, and the aggregate of the projects that wouldn't qualify for these funds is $4 billion, doesn't that mean the fund is about right?

    Mr. AUSSENDORF. In total, there is a difference of about $3 billion. How much of the ineligible, which is $4 billion as Mr. Dillingham said, and the AIP eligible which is about $6 billion, how much is the proportion of each of those that goes unfunded, we are not able to determine because we cannot crosswalk the funding data to the ultimate beneficiary project. So we don't know how much goes unfunded between AIP eligible and AIP ineligible.

    Mr. BLUNT. Don't you think that would be helpful to know that?

    Mr. AUSSENDORF. I think it would. Unfortunately, the data, at this point in time, doesn't allow us to do that. For AIP, you can track the money, where it's going and you know it's going to eligible projects and the same for PFCs. Together, they total about $2.5 billion for 1996. It will be a little more now with the higher appropriation.

    How much of the bonding, which is the largest segment of financing, how much of that is going towards ineligible versus eligible? When you look at a bond issue, it can be spread across a number of projects, some eligible, some ineligible. We just couldn't break down the data that fine, unfortunately.

    Mr. WIGINGTON. Mr. Blunt, could I just add a comment on that because I think it's a very important point you've raised, and that is we have seen for years and years and years, AIP funded at the highest, $1.9 billion coming on down, authorized at this committee at much higher levels, roughly $2 billion, $2.35 now, and we shouldn't be deluded into thing that even if we were successful in getting the appropriators to appropriate $2.35 billion, that that's enough for AIP eligible projects.
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    As you just heard, each year there is about $6 billion in projects that are AIP-eligible and AIP funding is coming in now at $1.7 billion at best.

    Mr. BLUNT. If there is some way we could follow up on that, I think that would certainly be helpful as we evaluate need here. It may defy following up on, but from the information I see so far, it would certainly be an important part of the equation of determining how much of a shortfall we really have in terms of meeting that need.

    Mr. Griggs, I think in your prepared testimony you talked about simplifying the AIP formula. I think the last time it was done, it was done by eliminating some setasides and entitlements. Could you give me some ideas of how you'd simplify that formula?

    Mr. GRIGGS. Perhaps my two contemporaries can do this also, but I think the whole formulation has got to be relooked at. Various congressional mandates have been met, set asides, buy name projects and all the rest, so the Administrator really has a lot less latitude than he should have, particularly in the control of discretionary money.

    I think if you could reach the level we're talking about of $2.3 billion and redefine how it's appropriated across the board, I think it would help an awful lot. You need the discretion if you're sitting in that chair as the assistant administrator for airports or the Administrator of the FAA to be able to control your own destiny.

    There is something which has not been brought up today which I think I'd be remiss if I don't bring it up. There's also got to be a recognition within this body that there is a shortfall of revenue that comes to the FAA to run itself, it has to come from the General Revenue Fund and that's not being addressed. How do you fill that gap of $2.1 to $2.5 billion? That's a problem that has to be addressed, how do you pay for the shortfall?
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    I think there's got to be a look at how is the FAA going to be able to use that money or where is it coming from.

    Mr. BLUNT. Mr. Chairman, I just wonder, and this may not be a reasonable thing to do but if our staff would at least look at the possibility on that earlier question of trying to figure out if there is a reasonable way to determine the ineligible funding needs that are out there so we know how big this gap is and maybe at least get back to us and tell us if that's not possible. If it is possible and reasonable, to try to get that number would be helpful.

    That's all the questions I have.

    Mr. DUNCAN. Thank you very much, Mr. Blunt.

    Mr. Boswell, do you have any questions?

    Mr. BOSWELL. No.

    Mr. DUNCAN. Mr. Bass, do you have any questions?

    Mr. BASS. No.

    Mr. DUNCAN. Mr. Dillingham, I notice on your charts that you've got that all needs for airports total about a little over $10 billion and there's funding available for $7 billion. According to your charts, large and medium hub airports already have about $5.5 billion of $7 billion that they needed but the small, nonhub airports have about half of what they need.
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    You know, I guess, there is sort of a friendly conflict between the airlines and airports and some of the airline people say some of these $10 billion in projects are just sort of a wish list. According to your charts, all of the highest and high FAA projects, the top priority projects, are being funded.

    To put it in plain language, are the airports underfunded or is it that some of these projects are just projects that would be real nice, but they're not really needed. Which is it?

    Mr. DILLINGHAM. It's a combination, Mr. Chairman. I've heard the concept of wish list as well, but what we found is that there is enough money for those highest priority projects, but it doesn't necessarily mean that all of the AIP-eligible projects are, in fact, funded because as Mr. Aussendorf was explaining, that bond money, which is the biggest source of funds for the large airports, can be applied up and down that bar graph you're looking at.

    So the airports are making decisions about what they want to fund. So for the basic safety, security, maintaining the infrastructure, there is adequate funding.

    Mr. DUNCAN. I notice on your main chart, slightly over half of the projects are being funded through airport bonds. Do you think airports are borrowing too much money?

    Mr. DILLINGHAM. I'm sorry, I didn't hear the last part of the question.
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    Mr. DUNCAN. Are airports borrowing too much money?

    Mr. DILLINGHAM. No, sir.

    Mr. DUNCAN. So you feel what they're doing is prudent, wise and safe?

    Mr. DILLINGHAM. Yes, sir.

    Mr. DUNCAN. From a fiscal standpoint?

    Mr. DILLINGHAM. Yes, sir.

    Mr. DUNCAN. Mr. Wigington, Mr. Barclay got into this some and even Mr. Griggs. You heard Mr. Dillingham say these PFCs—the way he put it was, they benefit almost exclusively or almost entirely the very large airports, while the AIP funds benefit much more the smaller airports.

    I even heard Mr. Griggs say that he thought it was a fair thing to cut the large airports' AIP funds by half and give them to the smaller airports. Is that correct, Mr. Griggs?

    Mr. GRIGGS. They are already being cut by half. We give up 50 percent of our entitlement funds to the smaller airports.
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    Mr. DUNCAN. Do you agree that more of the AIP funds go to the smaller airports if the PFCs were increased?

    Mr. WIGINGTON. Mr. Chairman, that is really the key element of our package proposal and it really is a package that we want to stress of a combination of higher PFCs, full funding of AIP and shifting of more AIP to smaller airports. The area where that shift makes the most sense is to build on what was done in 1990 in some portion of entitlements going to the smaller airports.

    We haven't worked out the specifics of that, but we are fully supportive of the concept. I'd like to quarrel a little bit with GAO's characterization that PFCs benefit large airports exclusively.

    As we've been talking about, the fact that the large and medium airports give up half of their entitlement, that does go into a small airport fund. That's a direct benefit of the PFC program whether that small airport puts in a PFC or not. Under the 1990 law, the small airports can also put in PFCs as well as benefit from AIP. We think that has worked well.

    What has not worked well is providing more PFC capacity for small, medium and large airports where they have projects that need it and where they have the willingness to put in the PFC to pay for those projects.

    This is a package proposal we're trying to make and what you just described is exactly what we're looking to do.
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    Mr. BARCLAY. It's even, I think, better news than that because if a proposal is airport by airport—for a large airport like St. Louis, our proposal is that if you increase the PFC say by $3, Len Griggs individually can say, okay, I either want to take advantage of the $3 PFC increase and give up the other 50 percent of my entitlements. Or, no, I want to keep the other 50 percent of my entitlements and I don't want to put on a PFC. So it's elective on a case by case basis. The small airports get a benefit as the larger airports actually go out and put on PFCs.

    Let me just mention one other thing that's often overlooked about PFCs. Because of the wisdom of this committee when they were instituted, PFCs are also very important funding sources for the local share match at smaller airports just to get their AIP grants. Because that is an eligible item, it has been very useful at the smallest airport.

    Mr. DUNCAN. Let me ask you this and we've got some votes, so I'll have to ask your responses be fairly brief. We got into this PFC debate last week, but a major antitax group headed by Grover Norquist put out a letter to all the members of this subcommittee just a few days ago strongly opposing any PFC increase and basically labeling it as a tax increase.

    All of you are well aware that in our tax cut package last year, we increased the taxes on the aviation industry by about $1 billion that basically comes from the passengers.

    What do you say to people who would say the PFCs, as Mr. Norquist said, is just another tax increase on the traveling public?
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    Mr. BARCLAY. Congressman, I've seen that and we've got a couple of answers. We think they are confused and I have a suspicion I know which of my friends is trying to confuse them.

    Clearly a congressional vote on the PFC is not a vote to increase taxes, it's a vote to increase local control over local facilities. In my Constitution, Federal tax has to be money that comes into the Treasury and the trust fund, in Aviation's case, and then be appropriated out. That clearly doesn't happen with PFCs, so they are not taxes.

    They are not even local taxes because every penny collected from a passenger in a PFC stays on the airport, goes into only capital facilities at that airport. Every penny goes into concrete, terminals, things passengers need in order to get on and through airports. So it is a fee for a service. It's a tax increase about as much as a fuel surcharge is. It's a payment for a service that's needed for those consumers to have a business to operate.

    Mr. DUNCAN. Do you think that air passengers are likely to get back most or all of that $1 billion tax increase they were hit with?

    Mr. BARCLAY. In PFCs?

    Mr. DUNCAN. No. Last year's Taxpayer Relief Act raised the taxes on aviation users by almost $1 billion. What I'm asking is do you think they're going to see the benefit of that or are they going to see an increase?

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    Mr. BARCLAY. History of the trust fund, despite the good efforts of this committee, would say they're not likely to see a lot of that back, but that doesn't make needs go away. The fact that they won't see it, doesn't make the needs and the growth we've got to accommodate in the system go away.

    Mr. DUNCAN. Mr. Dillingham, last week the airlines said some of the PFC funds have been spent on needless or wasteful projects. Did you find any of that and do you think from your research that the PFC should be increased?

    Mr. DILLINGHAM. As you know, Mr. Chairman, spending of the PFCs is almost entirely left up to the airports. There is little constraint, besides being AIP-eligible, applied to the expenditure of PFCs.

    We wouldn't go so far as to say that there have been misuses of the PFC, but we would say there have been issues raised such as the construction of the train in New York that has raised some concerns. But in order to address that, the Congress would have to put more guidelines on the use of PFCs.

    The second part of your question about whether PFCs should be raised would depend on what the objectives would be. We said almost exclusively for large airports and that is true, not exclusively but almost exclusively, large airports would be the beneficiaries.

    It would not affect the gap between the capacities of small airports and large airports in terms of funding their development.
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    Mr. DUNCAN. Mr. Griggs, this $800 million for a 9,000-foot runway seems exorbitantly, excessively high compared to almost every other airport project that we've looked at, comparing it to Seattle or a lot of others. Why is that runway going to cost that much?

    Mr. GRIGGS. It's not just the runway costs to construct it. The fact is I'm a landlocked airport and I've got to go in and buy $324 million worth of property in order to extend that runway.

    Mr. DUNCAN. I understand now. You're talking about buying up a lot of homes and so forth?

    Mr. GRIGGS. This is infrastructure plus the runway. To put that into proper context, the first year that runway opens in the year 2003, it will result in $50 million of savings in delay costs alone to TWA. Over a 10-year period, $300 million by the 2015 will result in delay savings alone. The delay savings will more than pay for the cost of building that runway.

    Mr. DUNCAN. You mentioned in your testimony you think the AIP formula should be simplified. How would you simplify it?

    Mr. GRIGGS. You have to take a look at it across the board. How much of the trust fund is being used for things other than airport infrastructure? How many control towers do we have to build and all the rest? I just think the formula needs to be looked at and rewritten.
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    I think there is an appalling lack of understanding, for example, among certain people as to what is a reliever airport, what is a general aviation airport, how do they function in the system of airports. I think these things need to be clarified and latitude be given as to how those monies can be appropriated.

    If I may answer the GAO, I don't know of any frivolous projects that have been built by PFCs irrespective of who makes the charge. When I was the Assistant Administrator, any project that was questionable, we sent it back and gave the airlines a chance to comment on it.

    I can't comment on the New York program, but I can tell you when I was there, that went back to ground zero and a study group was put together. I also think people have to realize, and we have to come to grips with it in this country, that passengers don't levitate from their front porch to that airport, so there's got to be some means to get them there.

    I can tell you at Lambert Airport, I'm pledging every one of my PFC dollars to the building of this expansion program and every dollar that I can lay my hands on. You can't just look at AIP in isolation. You've got to look at the entire budget for the FAA.

    For example, we're being told now that I've got to fund a large portion of the F&E program next year. I might have to pick up $17 to $25 million of buying ILS' light lanes and all the rest which traditionally has been bought under the FAA budget because that's how severe the restriction is. So all is not rosy in the land of Oz.

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    Mr. DUNCAN. As I mentioned earlier, we've been giving the FAA its biggest increases ever in fund.

    Mr. GRIGGS. They need it.

    Mr. DUNCAN. We're going to let you go, we've got two votes going on. We thank you very much for your most helpful testimony.

    We'll be in recess for a few minutes for these votes and then we'll start with the second panel.

    Thank you very much.


    Mr. DUNCAN. First of all, I want to apologize. I ran into Chairman Shuster and he wanted to talk to me about the BESTEA legislation, so I had to meet with him for a few minutes.

    I do want to welcome the second panel and we'll get started. The second panel consists of Mr. Robert W. Kunkel, Wisconsin Bureau of Aeronautics Director, representing the National Association of State Aviation Officials—in fact, Mr. Kunkel serves as Chairman of that group; Mr. Ronald F. Price, President, Airport Consultants Council; Ms. Stephanie Foote, Chief of Staff to Mayor Webb, Denver International Airport and the City of Denver; Mr. John Clark, Vice President for Aviation, Jacksonville Port Authority; and Mr. F. Lee Tillotson, Senior Director of Planning, Greater Orlando Aviation Authority. We are pleased and honored to have you all here.
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    Before we proceed, Ms. Brown, you have a constituent I believe you wanted to mention?

    Ms. BROWN OF FLORIDA. I have two.

    Thank you, Mr. Chairman.

    I'm very glad that we're having this panel here today to give us a real perspective of the issues that airports are facing. We are considering the reauthorization of AIP. We need this valuable input.

    One thing that I think is critical is our consideration of increasing AIP funds and seriously looking at the passenger facility charge cap.

    I would like to give a special welcome to Mr. John Clark from Jacksonville Airport and Mr. Lee Tillotson of Orlando International Airport. Both of these directors have done an incredible job of handling expansion fueled by trade and tourism. Both airports serve as vital, integral engines to their respective communities. Federal dollars are absolutely critical to sustained success in the aviation industry.

    Mr. Chairman, I look forward to the panel's testimony today and working for a better AIP.

    Mr. Tillotson, I want you to know for two weeks straight, there is not one seat heading to Orlando, first class or coach.
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    Mr. DUNCAN. Thank you very much, Ms. Brown.

    We always proceed in the order of the call of the hearing as the witnesses are listed and that means Mr. Kunkel will proceed first.


    Mr. KUNKEL. Thank you, Mr. Chairman.

    On behalf of the State Government, Aviation departments, serving the public interest in all 50 States and Guam and Puerto Rico, it's my privilege to present our proposal for the reauthorization of the AIP.

    First and foremost, the States recommend that AIP be authorized and appropriated at a minimum of $2 billion over a period of 5 years.

    The National Civil Aviation Review Commission and the Air Transport Association, the Airport associations, all agree with us when all 50 States, the airlines and a congressionally mandated nonpartisan commission all independently confirm that a $2 billion annual AIP is necessary for the health of this Nation's airports, then $2 billion ought to be the minimum that Congress is willing to fund. Mr. Chairman, I appreciate your comments on the $2.3 billion authorized for this year.
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    We also ask for a 5-year AIP to match the 5-year FAA Administrator. As the person who develops the airport capital improvement plan and statewide system plan in Wisconsin, I can personally assure you that a 5-year, $2 billion program makes sense.

    We would be able to avoid the disorderly start and stop nature of the development and construction of our Nation's airports due to the short time frames and uncertain funding levels.

    Second, we strongly encourage you to increase State apportion funds by a minimum of 1.5 percent. This increase is needed to fund essential planning activities. The 1996 AIP reauthorization legislation did not include set aside for system planning, which has traditionally been a part of the legislation since its inception in 1982.

    As a result, the planning efforts conducted by the States have been severely impaired. It is critically important to conduct continuous planning for our Nation's airport and airway infrastructure. Planning assists airports and States in complying with their AIP grant assurances, including requirements for an approved airport layout plan, a pavement management plan, and protection of aerial approaches.

    Airfield pavement maintenance utilizing information derived from these studies is critical to protecting the investment we have already made in our Nation's airport infrastructure.

    Our third proposal concerns the expansion of a program deemed a success by Congress, the FAA, the GAO, airports and the States themselves. We ask you to make the State Block Grant Program available for voluntary participation by all qualified States.
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    In March of 1996, the General Accounting Office presented testimony entitled ''The State Block Grant Program Is A Success.'' It is also saving the American taxpayer money by making the Federal dollar go further.

    Wisconsin has been a block grant State since 1993. We have a channeling act in Wisconsin for Federal funds. Thus, from an airport owner's perspective, not much changed. However, from the State's perspective, the Block Grant Program has decreased our paperwork considerably. Rather than submitting 10, 12 long, detailed project applications for individual projects, we now submit one streamlined application for a block grant.

    Neither the State nor the FAA has to deal with these numerous individual grants. The State Block Grant Program has reduced the workload of the FAA airport engineers so that now they can concentrate on the larger air carrier airports and provide them better service.

    NASAO's fourth recommendation is that the program flexibility should be a major concern in this reauthorization. We recommend three specific areas of flexibility which will improve the system and save Federal money.

    First, the Federal funding share should be flexible. Simply put, the Federal Government today foots 90 percent of its costs of most airport projects, but what if a State wants to speed up or expand the process by paying 15, 20 or even 25 percent of the costs?

    In 1996, you gave the FAA authority to test the flexible local share in the interest of innovative financing. That program is working and should be expanded and made permanent.
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    Second, we also believe that airport design and construction standards for pavements need to be more flexible. Today, these FAA standards adhere to a one-size fits all type of criteria, but State highway standards are less expensive to implement in small airports, while maintaining the highest degree of safety and durability. At small northern airports, the most critical load is usually a snow plow. Flexible pavement standards make good, common sense.

    Third, we recommend that you actively promote flexibility through innovative financing programs such as State infrastructure banks or State revolving loan funds. Just like the GAO study recommended today, the timing of Mr. Dillingham's testimony was very appropriate today. We hope you will establish a pilot program of three States to test the viability of these innovative financing programs.

    Our fifth and final recommendation is that you reaffirm Congress' intent that all existing grant assurances must remain in effect for their full term. We should have every right to expect that airport sponsors will live up to their legal obligations they willingly and knowingly accept when they receive taxpayer support for their airport.

    Mr. Chairman, that concludes my statement.

    Mr. DUNCAN. Thank you very much, Mr. Kunkel.

    Mr. Price?

    Mr. PRICE. Thank you, Mr. Chairman and distinguished members of the House Aviation Subcommittee.
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    On behalf of the Airport Consultants Council, I thank you for the invitation to present our views on the reauthorization of the Airport Improvement Program in light of the National Civil Aviation Review Commission's recommendations.

    First, as background, the ACC members are consultants who provide professional services to the entire aviation industry, including airports, passenger and cargo airlines and the military. The ACC is comprised of 215 member firms that employ over 150,000 people and undertake thousands of airport development projects every year in every State of the Union.

    Virtually every airport in the United States has been planned and designed by our members and we are largely responsible for identifying airport development needs from the smallest general aviation airport to the largest airports in the world.

    This role was recognized by the General Accounting Office who requested the ACC's assistance during their preparation of a document entitled, ''Airport Development Needs,'' which was released in April 1997.

    Today, we would like to present four specific positions to you, to respond to questions you may have and to encourage you to contact the ACC if we may be of assistance in the future. The following issues are submitted for the record and are of the greatest importance to our membership.

    First, the GAO report that I mentioned above, as well as a recent study conducted by Coopers & Lybrand, indicate that proper and safe overall development and operation of the National Aviation System will require an infusion of at least $10 billion annually over the next 6 years.
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    However, due to budget and funding constraints, ACC supports, as mentioned by other panelists this morning, as a minimum, the $2 billion fiscal year 1999 AIP funding level recommended by the National Civil Aviation Review Commission and urges this subcommittee and Congress to support the continuing development of both traditional and innovative capital improvement funding programs.

    Second, ACC supports a multiyear authorization program for AIP with known funding levels. A 5-year program is a necessity because a typical airport project, such as a new runway, can require 4 to 8 years from planning through the requisite environmental review and permitting process, design and construction. The need to minimize disruption to airport and airline operations also contributes to the project implementation schedule and the importance of a multi-year program.

    Three, the use of passenger facility charges (PFCs) has enabled airports to proceed with needed improvements. We believe that the PFC cap should be removed and determined through an open dialogue between the airport, airlines and local community. We strongly support the airport's ultimate right to implement a PFC program to develop airport improvements that are depicted on the approved airport layout plan. This also is consistent with the National Civil Aviation Review Commission's recommendations.

    Fourth, ACC is a strong supporter of qualifications based selection (QBS) for the procurement of all professional consulting services. As elected officials, we are sure you will agree that AIP and PFC funds should be used to get the highest quality planning design and engineering services for our national airport system. QBS is the proven way to achieve this objective.
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    Mr. Chairman and members of the subcommittee, the air transportation system is an important part of your communities and the Nation's economy. The ACC is committed to doing all that we can to make the system the best it can possibly be. In that context, the ACC looks forward to working with you in the future.

    We thank you for this opportunity to express our views.

    Mr. DUNCAN. Thank you very much, Mr. Price.

    Ms. Foote?

    Ms. FOOTE. Thank you, Mr. Chairman and members of the subcommittee. I appreciate the opportunity to testify before you today.

    In the interest of time, I would like to introduce my full statement into the record and also the DIA Noise Study Coordination Group report which was presented to our congressional delegation a week ago.

    I would like to just make some comments for the record.

    First of all, I would like to start out by saying that I'm not here asking for money. I would like to say that DIA is a state-of-the-art facility. It's fiscally sound and it has substantially reduced delays, not only in Denver but in the entire aviation system.

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    It has also substantially reduced noise impacts. While Stapleton Airport was operating, there were 14,000 people in the 65 DB. By comparison, Denver International Airport has less than 200 people in the 65 DB contour.

    Despite our excellent record on noise, Denver has gone the extra mile to address community concerns. Last year, we joined with seven counties near DIA to have an independent consultant analyze noise from the airport. The results you will have in detail in your report for the committee.

    Most importantly, I'd like to point out that the study determined that the sixth runway would have no significant impact on noise and the study also further confirmed that less than 200 people are within that 64 db contour.

    DIA was originally designed to have six runways and we would like to way we believe it is unfair to continue to penalize Denver by continuing a prohibition for the fifth consecutive year. As you know, we're going to see a great deal of capacity increase by major airlines serving DIA.

    I'd also like to point out that based on what I heard in previous testimony, the completion of the sixth runway, which as currently graded, filled and compacted, would require an additional, approximate $75 million to complete.

    In closing, we would simply like to ask that the AIP statutory criteria apply to DIA in the same way that it applies to every other airport in the United States.

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    We thank you for your continued support and we ask you to help us in lifting the ban on Denver International Airport's six runway.

    Thank you.

    Mr. DUNCAN. Thank you very much. I suppose you just heard about the runway in St. Louis costing $800 million, so $75 million is quite a difference.

    Mr. Clark?

    Mr. CLARK. Good morning, Mr. Chairman and members of the committee. Thank you for this opportunity to bring testimony to you this morning.

    We have submitted this in writing, so I would just like to briefly hit some highlights of my testimony.

    I'm here to ask the continued support of the Military Airport Assistance Program. In 1996, this committee was successful in preserving that program which is a discretionary program of the AIP program.

    We believe this is extremely critical looking at the number of military facilities that are coming on line as a result of the BRAC Act. In Jacksonville, we have a military facility that is subject to the BRAC Act as well.

    Even going beyond the community of Jacksonville, we think this program is very vital because the preservation of these airports as a part of these military facilities, we believe adds capacity to the national system. Having these discretionary funds made available will allow these communities to begin to make the transition from military to civilian airports which will greatly enhance the opportunity for capacity into the future.
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    Our recommendation and request is that this committee would consider increasing the number of slots being made available to those airports that are allowed to be in the program. Currently, there are 12 slots available.

    It is our understanding between now and the year 2000, there will be an additional 4 airports assigned or permitted to enter into this program. We would ask that the program be increased from 12 to 15 because more and more bases are coming on line. I stated earlier I believe this will add considerable capacity to our aviation infrastructure.

    In the case and point of Jacksonville with Cecil Field, there is a 12,000 foot runway in place capable of handling anything in the flying inventory. We believe that such facilities in the future will certainly pay for themselves by adding the capacity into the overall system.

    Once again, our request is that we urge this committee to consider increasing the number from 12 to 15.

    Thank you.

    Mr. DUNCAN. Thank you very much, Mr. Clark. Cecil Field near Jacksonville is named after a distant relative of mine.

    Mr. Tillotson?

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    Mr. TILLOTSON. Thank you.

    Mr. Chairman and members of the Aviation Subcommittee, I appreciate the opportunity to be here today. I have submitted our detailed testimony for the record and I'd like to make just a few key points today.

    The committee has heard a lot of testimony I know about the various environmental conditions that affect the airport and airline industry and I know you're aware of the dramatic growth of this industry since deregulation. Orlando has been a key beneficiary of deregulation and that dramatic growth. I know you're familiar with the unparalleled growth that's been projected.

    What I'd like to spend just a minute on is to talk to you about the conditions and the situation in Orlando so you can know what is different about Orlando and the type of airport that we have so you can put my points into context.

    The business leadership in central Florida refer to our airport as the economic linchpin for Central Florida. We're a $200 million business; we're responsible for over 54,000 direct and indirect jobs and we have a $14 billion economic impact on the central Florida economy.

    What is different about our airport, so that I can make a few key points for you. I believe that it's critical that you understand that the business environment for many airports is based on the type of airlines and type of service that airport has.

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    By FAA definition, Orlando International Airport is a large hub airport, but most important for you to understand is we are not a fortress hub, dominated by a large air carrier. We are a residual origination and destination airport, and our signatory airlines have exclusive rights to most of our terminal space. That terminal space was built and backed by revenue bonds that are funded by rental fees and landing fees.

    Only 12 percent of the passengers in Orlando connect to another airport. Delta last year was our biggest carrier at 28 percent . We have 58 scheduled airlines and last year we had over 200 charter and different airlines fly into our airport.

    We have been one of the fastest growing airports over the last several years. In 1996, we were the fastest growth airport in the country. Last year, we were number two and we've continued to see an 8 percent annual growth as an average.

    Over the next 10 to 15 years, we certainly expect to double in the number of passengers with a growing percentage of international. So this is a business environment that I wanted to make some points on.

    Orlando right now is gate constrained. We're unable to provide gates right now for new entry airlines. We are also unable to meet the parking. We had almost a crisis on our hands at Christmastime with a lot of our passengers unable to get to their airplane on time and missing airplanes.

    The curbside baggage makeup and other landside support facilities were inadequate, the demand exceeded the supply. We have structured our capital program to try to meet these near term requirements. These projects are now in design and construction; they have the full concurrence of the airlines; they are funded by joint revenue and PFCs primarily.
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    We've tried to utilize our limited entitlement funds and a very small amount of discretionary funds to start a taxiway project. We've committed our entitlement money for the next 4 years to the completion of the taxiway.

    This ongoing expansion and renovation will not provide the needed capacity and the airlines have also agreed to start a new terminal complex in another part of the airport and based on demand, we will start that complex this fall.

    We're planning on using PFCs and discretionary monies to fund that project. In addition, as we start the actual building of the terminal, we'll use revenue bonds.

    The capital improvement program relies on all the economic resources that are available. It's based on three important principles for Orlando. Locally available capital should be utilized to the maximum before requesting AIP discretionary funds, airline and airport commitment to develop flexible facilities while maintaining reasonable debt service and then the FAA criteria and cost benefit analysis.

    The points that we would like to make in our testimony based on that business environment and very strong growth are as follows. The Authority supports increasing the passenger facility charge cap to allow local funding decisions. However, we are concerned about proposals which would couple an increase in PFC cap with an additional forfeiture of AIP entitlement dollars by the airports which utilized the increased cap.

    This is a regressive measure that appears unfair to the large airports, which make the greatest contribution to the trust fund and in most cases, have the greatest capital need. These entitlement funds are the most flexible funds that we have. They allow local decisions and local priorities to establish their use. They represent a true user fee approach for traffic growth generates additional funds.
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    The Authority also encourages Congress to include language in the AIP reauthorization which would require eligible airports to impose and collect the maximum allowable PFC before the FAA may extend discretionary grant funds from the AIP. This position reflects the principle widely held that entities which cannot or choose not to utilize the source of capital dollars available locally, such as the PFCs, should not be rewarded at the expense of those which can and do.

    AIP funding should not be an alternative funding mechanism. Instead, it should complement local funding alternatives such as PFCs.

    The Authority recommends that a portion of the funds reauthorized be reserved or set aside for capacity projects. We recognize that priority must be given to safety, security and preservation.

    The problem that we encounter is that capacity projects receive relatively low priority nationwide. Airports and regions that are experiencing exceptional growth, such as Florida and Orlando, need to have the financial resources prioritized to meet the demand.

    For example, Florida has averaged approximately 8 percent of passenger enplanements for the Nation for the past 10 years. Yet, in 1997, Florida only received 3.7 percent of the national AIP allocation.

    Also in 1997, Florida returned $16.2 million in entitlement funds to Washington and received back $2.8 million out of the $16 million for small airports.
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    In closing, we truly believe in the partnerships we have with the Federal Government and with the airlines. We believe that the flexible use of the passenger facility charge funds in consultation with the airlines has worked well. It's the key to meet the future needs of the traveling public.

    We also believe that capacity driven projects will require significant Federal funding from the AIP.

    I thank you very much for this opportunity and I will be happy to answer any questions.

    Mr. DUNCAN. Thank you very much, Mr. Tillotson.

    As I stated earlier, I started all the questioning yesterday to both panels and I'm going to yield my time on this first round to Mr. Watts.

    Mr. WATTS. Thank you, Mr. Chairman.

    Ms. Foote, I have flown to the Denver Airport numerous times and it's a very delightful airport. It's one of the few airports you enjoy having layovers because it's so much to do there.

    In your testimony, it states the existing five runways can accommodate 120 operations per hour. Out of curiosity, how many operations per hour does Denver have during an average hour and also during a peak hour?
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    Ms. FOOTE. Congressman, if you'd wait just a minute, I need to consult with my legal counsel—80 to 90 normally, 120 peak per hour.

    Mr. WATTS. 8 to 90 normally and the 120 is peak hour.

    Mr. Price, you called for use of qualifications-based selection in AIP and the PFC programs. How would the use of QBS change current airport practice and what have been the consequences of not requiring QBS for the PFC-funded projects?

    Mr. PRICE. As I understand your question, Congressman, the QBS now does apply to all AIP-funded projects. Where it does not apply is to the PFC-funded projects. We think it is important that all airport development program improvements be subject to the same laws for procurement of professional services.

    QBS is a process that works. It's the best method to help an airport sponsor select the best qualified professional services firm to plan, design and implement their projects. It also results in the lowest cost for these projects when you consider not only the initial establishment cost, but also its maintenance and operations cost or as you might term them life-cycle costs.

    Mr. WATTS. Mr. Chairman, that's the extent of my questions.

    Mr. DUNCAN. Thank you, Mr. Watts.

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    Ms. Brown?

    Ms. BROWN OF FLORIDA. Mr. Tillotson, in your testimony, you stated that ''No greater airline input into the PFC approval process is necessary because the program has worked very well, except in a few isolated instances.'' I think the airlines would agree that they support the projects PFC has funded in the vast majority of the time. Some recent approved PFC transit projects have come under criticism from both the airline and groups with oversight responsibilities.

    Do you think the exception to the rule should be a tolerance as a price to pay for an otherwise good program or do you think additional mechanisms should be put into the process?

    Mr. TILLOTSON. We think the process, as it is, if used properly, has worked well nationwide, the participation, consultation, but local decision. We believe it has been a good system and would recommend it be continued but used properly.

    Ms. BROWN OF FLORIDA. What is your view on AIP funding for capacity projects in airports experiencing high rates of growth and, after safety, is capacity a priority for the AIP funding?

    Mr. TILLOTSON. One of the things we have discussed within the Florida airport managers group is a method of one, recognizing capacity; two, of course recognizing the importance of the safety, security and preservation but where growth is occurring, we would like for the committee to take a look at creating a set aside if, in fact, AIP is raised to the possible area and we certainly support the $2.35 authorized level.
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    We think a percentage of that could possibly be a set aside identified for capacity. We think this would help small airports as well as the large airports.

    Ms. BROWN OF FLORIDA. Ms. Foote, the committee supports removing the prohibition established by the Appropriations Committee that prevented funding being used to build the sixth runway in the DIA in the last authorizing cycle.

    Our provision dropped out of the conference, although I agree that Denver should not be singled out legislatively. Why do you think we should have a sixth runway in Denver?

    Ms. FOOTE. The airport was originally designed with a sixth runway layout. Currently we have one north-south runway which does not have a mate, therefore, it's unbalanced so particularly in inclement weather, we don't have the full use of the entire layout plan.

    Ms. BROWN OF FLORIDA. That's my last question.

    Mr. DUNCAN. Thank you very much.

    Mr. Blunt?

    Mr. BLUNT. Mr. Kunkel, you suggested that maybe different States could pay different percentages, that we eliminate the 10 percent cap. If you do that, how do you prevent the FAA from giving a real advantage to those States that can afford to essentially bid up their project by being willing to do more of it?
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    What do you do to prohibit that or maybe you don't think that's a bad idea if that happens?

    Mr. KUNKEL. Two things. First of all, right now under the innovative financing that was authorized under the 1996 reauthorization that allowed for some flexible sharing of costs and cost-sharing. That program seems to be working. It's a program that you apply for and we would like to see that continued.

    In Wisconsin, we're in a block grant State, our State apportion funds, which is a fixed amount of funds, we do some flexible cost sharing there with the sponsor. In that way, those fixed amount of funds are spread further; the State puts in more; a higher percentage and the local airport puts in a higher percentage. Therefore, you get more bang for your buck out of that fixed dollar amount.

    Mr. BLUNT. Mr. Price, there's one proposal the airport themselves be allowed to a higher PFC and to do that, they'd have to drop out of the AIP program. Obviously that means there'd be less money going into the AIP but there'd probably be more of the money in the AIP that would go to small and medium state airports.

    What's your response to that, just letting airports set more of the PFC themselves and in return for that, not being a part of the other program.?

    Mr. PRICE. I think that's a choice the airports can make and a lot of them have moved along that line. I think it's also important to recognize that PFCs can be used a bit more flexibly at least if the regulation was modified.
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    Speaking for myself, I think it would be very appropriate if the airports collecting PFCs at the large hub, for example, were able to use those funds to support projects at their feeder facilities because the passengers are certainly viewing their traveling experience—if you're boarding a United Airlines Express flight for example at one location, connecting with a United flight at the hub, the passenger views that travel as on United, so the experience extends back to the feeder facility.

    Why not allow PFCs to be collected at a higher level and the funds distributed on a system basis that makes sense for the system as a whole. Therefore, by raising PFCs caps and allowing more funds to be collected through that process, you open up the opportunities to create funding mechanisms at airports that don't have the passenger levels to support the needed improvements to make the traveling experience uneventful.

    Mr. BLUNT. Would you advocate raising the cap or just eliminating the caps if airports want to set their own PFC?

    Mr. PRICE. I think the caps could be eliminated. There is an opportunity as well for airports to recognize they are in competition with other airports for airline service. Those that can accomplish their needed improvements in the most economical way, don't need to raise as high a PFC level and that might induce airlines to serve that particular airport over another.

    Also, airlines do have some influence as well as part of their current lease arrangements with many airports with which they have majority in interest clauses. They have an opportunity to participate very vocally and forcefully in some of the programs. So there is an adequate check and balance process in place.
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    Mr. BLUNT. So you think the market would set the effective cap better than legislatively setting that cap?

    Mr. PRICE. I think the marketplace always does a better job.

    Mr. BLUNT. What about dropping out of the AIP program in return for the ability to set those caps or to set the fee and not have a cap?

    Mr. PRICE. I think the AIP program could then be better directed to the smaller airports, particularly general aviation. We haven't talked much about that this morning, but the general aviation airports are in dire need of improvements. Their financing capabilities are rather limited.

    If more funds from AIP—again looking at a system, the collection of system funds here—can be distributed to those general aviation airports that best support the system, then I think we have a very adequate and appropriate response to general aviation requirements.

    Mr. BLUNT. Does anybody else want to respond to that?

    Mr. KUNKEL. Our concern, if you took the large airports out of the AIP program, would be that when we go to appropriations to get the money, you don't have the support of your large communities. You don't have the New Yorks, the Los Angeles and Orlandos. I think there is a real danger in not getting funding for the AIP program.
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    It sounds good if you take the large airports out of the AIP, there'd be more for the small airports, but I'm not sure that would necessarily happen.

    Mr. BLUNT. Anyone else have an opinion on that?

    Mr. CLARK. I believe that it should be a local issue but the one concern is I think there needs to be some parameters around it because the one concern is as you know, with the PFC, you could be in a small community and be transferring to these larger hub airports and incurring an additional cost, which you're not necessarily being benefitted in that local community but rather the benefit is then transferring to the larger hub airport.

    I think that's the one caution that I see with totally removing a cap. I certainly believe that it should be elevated and more discretion given to the local community but there are some other concerns that I would see.

    Mr. BLUNT. So you're suggesting there'd be a higher cost to the total ticket price when you travel out of an airport to a hub, for instance the hub airport raises—that makes the ticket higher than it otherwise would be?

    Mr. CLARK. Exactly. I could take a trip from Jacksonville to somewhere in California and maybe my routing is not direct, so I would make two stops to get there. The PFC in Jacksonville may be set at $2 and I transferred through one of the larger hubs and if there is no cap, it could be $10 and then going through another, it could be $12.

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    The community in which I live and serve is not receiving that benefit and I think there is some caution in that because the needs are different.

    Mr. TILLOTSON. The comment I would add is that we feel the participation or, in some cases, lack of participation in a PFC in order to position airport potentially for AIP money is a little game that some play.

    What we would like to see is some consistency so that it's a level playing field and for people to access the AIP discretionary funds, they need to be able to operate from the same playing field as those using PFCs.

    We would recommend that a requirement be there to impose a PFC at some minimum level before airports could access those AIP funds.

    Mr. BLUNT. So you're actually arguing just the opposite of the premise which is that everybody should have access to the AIP funds, no matter how much their PFC is?

    Mr. TILLOTSON. We think that access should be based on the criteria and benefit cost analysis so you can prioritize the various types of projects, recognizing that there is an airport system. We're very aware of that, we're not just arguing a large airport position but we think that the local decisions and the local authority that is there to participate in the PFC program or not is a key issue.

    People need to use that local authority that they have before they ask the Federal Government for more help.
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    Mr. BLUNT. You don't think it would be worth it to the airports to be out of the AIP program to be able to set their own PFC?

    Mr. TILLOTSON. We think the AIP program is still going to be a key piece of the overall financial plan. We think that there is a national capacity issue that has to be addressed and the AIP program has worked well to address the national system. The PFC is complementing that program to address local issues. So we think the programs complement each other.

    Mr. BLUNT. Mr. Chairman, I'm out of time. Thank you.

    Mr. DUNCAN. We've got some votes starting and I've got some German aviation officials waiting for me in the room.

    Mr. Kunkel, let me ask you this. I'm intrigued by the participation. We got the State Block Grant Program expanded to include Tennessee as one of the nine States in this last legislation. What has been your opinion or your impression of the way that has worked? Is that working effectively, are you pleased with the way that's working out at this point in Wisconsin?

    Mr. KUNKEL. Yes, sir. In Wisconsin, we've been under the Block Grant Program since 1993. In Wisconsin, we're a channeling State so that all Federal funds are channeled through the State.

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    From an airport's view, not much changed when we got in the block grant, but at the State level, it's decreased our workload considerably. We don't have to fill out these numerous project grant applications.

    It also allows us more efficient use of the funds. So when we take bids for a project, if those bids come in low, we can put the money over to another airport. Under the previous system, you had to get a grant amendment; if the costs came in higher, you'd have to get a grant amendment to do the project. So it allows us to shift the funds immediately to another project and they're needed.

    It's decreased the paperwork considerably, the number of amendments have almost been eliminated and it allows us to spend the money faster and all of it.

    Mr. DUNCAN. Mr. Price, when the ATA testified last week, they were very strong in recommending a cost benefit analysis prior to the expenditure of PFC funds. What do you think about that? What problems do you think that would cause or do you see some benefit in that proposal?

    Mr. PRICE. I believe that's the proper way to do planning and design. You need to evaluate each project based on the benefits it provides to the users versus the cost to implement. There needs to be a test of reasonableness and viability.

    As professional engineers and architects and planners, that's what we do. It's part of our business. So I think it's a good idea. We want to make sure the monies we have, however limited they might be, are spent in the most productive way.
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    Mr. DUNCAN. Mr. Tillotson, what do you think?

    Mr. TILLOTSON. We do, of course, use benefit cost analysis for the AIP. We use it within our internal organization before we make our recommendations to the airlines. Our recommendation would be that we would continue the participation and consultation that we have and provide that information to the airlines.

    One of our key roles at the airport is to be an advocate for the passenger and sometimes some airlines come up short in that area quite frankly. That is the role the airports take as part of our being in public service. We think that is what our role is, to do that benefit cost analysis on the PFCs internally and not establish an airline cost benefit oversight.

    Mr. PRICE. I think also that benefit-cost is not necessarily the sole criterion that should be used. There have to be other factors that motivate an airport to make the necessary improvements, whether it's level of service to the passengers or safety issues as well. It shouldn't necessarily be the only criterion that's applicable.

    Mr. DUNCAN. Thank you very much.

    Ms. Foote, I have been very impressed with the visits I've had to the Denver Airport and I think you seem to be doing a very good job out there. I wish you the best.

    Mr. Clark, I agree with you that the military airport program probably should be expanded considering the situation we're in with some of the military bases being downsized or closed down and so forth.
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    Mr. Tillotson, there were some airport people recommending that we decrease the amount the large airports received from the AIP program if the PFCs were increased, but you don't seem to be too much in favor of that?

    Mr. TILLOTSON. My remarks were primarily directed at the entitlement funds and the recommendations that have been made. Of course we've already given up half the entitlement monies. We think the AIP program as a whole, the discretionary money area, is the area where we need to support the small airports.

    Mr. DUNCAN. While you were making your statements, I requested the staff get me the figures. They said last year, you received $3.8 million in entitlement programs, they don't have the discretionary figures, but is that correct?

    Mr. TILLOTSON. That is correct and we received $3.3 million in discretionary.

    Mr. DUNCAN. And then they said the estimates are that you'll receive $403 million over a 12-year period and that takes you up to 2005 from the PFCs. So you're receiving a little over $35 million a year of your PFCs? Is that accurate?

    Mr. TILLOTSON. That's correct. We'll be growing to that number as the number of passengers continues to grow. Of course one of our problems is that our current facility, which was designed for 24 million passengers we're already at 27 million passengers.

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    We think we can maintain the level of service up to the 33 to 34 million passenger area, but we certain expect that the cost of putting the new terminal and taxiway facilities on line is going to be in the $1 to $1.2 billion area. So we're going to need every penny of those funds to meet the demand and the growth.

    Mr. DUNCAN. I can tell you that one of our airlines in Knoxville started a direct connection to Orlando a few years ago and it has been one of the most successful connections. It is full all the time back and forth. So we're pleased with our connection with your airport.

    Mr. TILLOTSON. Yes. We're seeing some very full airplanes.

    Mr. DUNCAN. Ms. Brown?

    Ms. BROWN OF FLORIDA. I want to thank the panel but Mr. Chairman, I explained to you in the last two weeks, I have not been able to get a seat to Orlando. Mr. Tillotson, I want to know when are you scheduled to go back?


    Mr. DUNCAN. We have to go cast these votes and I thank you very much for your participation on this panel and your helpful testimony.

    Thank you.

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    We'll conclude this hearing.

    [Whereupon, at 12:09 p.m., the subcommittee was adjourned, to reconvene at the call of the Chair.]

    [Insert here.]




U.S. House of Representatives,

Subcommittee on Aviation,

Committee on Transportation and Infrastructure,

Washington, DC.

    The subcommittee met, pursuant to notice, at 10 a.m., in Room 2167 Rayburn House Office Building, Hon. John J. Duncan, (chairman of the subcommittee) presiding.

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    Mr. DUNCAN. Good morning and welcome to the fourth and final hearing on issues associated directly with our FAA reauthorization legislation.
    We look forward to hearing from our witnesses this morning on a variety of very important issues, and we do have a wide variety of witnesses, 11 witnesses on two panels representing all segments of aviation interests.

    We had a great many more witnesses who wanted to testify but we had to limit it someplace, and so we have, I think, two really outstanding panels here this morning.

    I am going to keep my remarks very short this morning because, I have mentioned at our previous hearings I think, almost all of the issues that we would like to address in regard to FAA reuthorization and I will not restate them here today.

    All of the witnesses who wish to testify, whom we were not able to include in these two panels, we will include their testimony as a part of the record and we will give that full consideration as we proceed through the days and weeks ahead.

    I look forward to this morning's testimony and I now yield to my good friend, the ranking member of the subcommittee, Mr. Lipinski.

    Mr. LIPINSKI. Mr. Chairman, I thank you very much, and I am going to be even more brief than you.

    I welcome all the panelists here. I look forward to your testimony, and I yield back the balance of my time.
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    Mr. DUNCAN. Thank you very much.

    Mr. Boswell, do you have any statement?

    Mr. BOSWELL. No, Mr. Chairman.

    Mr. DUNCAN. Mr. Moran, do you have any opening statement?

    Mr. MORAN. No, Mr. Chairman.

    Mr. DUNCAN. The first panel will consist, and I will ask them to go ahead and take their seats at the table. The first panel consists of Captain J. Randolph Babbitt, who is president of the Air Line Pilots Association, International; Mr. Edward A. Merlis, who is senior vice-president for government affairs at the Air Transport Association; Robert W. Poole, Jr., who is president of the Reason Foundation; Mr. Michael J. Pittard, who is chairman and chief executive officer for Aviation Charter Services, and is chairman of the National Air Transportation Association; Edward M. Bolen, who is president of the General Aviation Manufacturers Association; and Ed Wytkind, who is the executive director for the Transportation Trades Department of the AFL-CIO.

    Gentleman, we are very pleased to have each of you with us this morning. We always, at this subcommittee, proceed in the order of the call of the hearing, that the witnesses are listed in the call of the hearing. That means that Captain Babbitt, we will proceed with you first.
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    Most of you have been here with us several times before. We welcome you back. Captain Babbitt, you may proceed.


    Mr. BABBITT. Thank you very much, Mr. Chairman, and I thank you and the entire committee for giving ALPA the opportunity to testify this morning on this issue.

    As you are aware, I am the president of the Air Line Pilots Association. We represent over 49,000 pilots now, between the United States and Canada. What I would like to do this morning, if I could just briefly, lay out several of our concerns this morning. Our written statement will detail with far more specificity a number of issues, and I would refer you later to that document.

    In the matter of overall airport funding, ALPA supports the recommendations of the National Civil Aviation Review Commission on which we were privileged to have a voice and serve. Specifically, ALPA supports the recommendation that airport capital improvements and requirements be funded to a minimum of $2 billion annually and special attention be paid specifically to the smaller airports to ensure that they have the necessary capital to fund needed improvements.
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    We presented testimony to this subcommittee on reauthorization of the AIP 2 years ago and we are very concerned that there has been no apparent movement by the FAA on several very important Congressional directives to enhance airport safety. In particular, the establishment of vertical visual guidance systems on runways and the provisions of adequate safety areas beyond the end of runways at certified or certificated airports.

    As our airports become more congested it is essential that we move ahead with improvements that will not only enhance capacity but at the same time enhance safety at those airports.

    The move to squeeze out additional capacity our pilots, the pilots that I represent, are understandably wary of initiatives that put the squeeze on safety at the same time. Land and hold short operations are a good example. Seeking to use runways more efficiently by requiring aircraft to land and hold short of an intersecting runway or taxiway or other predetermined point in order to allow additional aircraft operations beyond that intersection.

    We are working with the FAA to refine such procedures so that they can be implemented safety but we recommend that besides additional construction funds that Congress approve additional safeguards within the AIP, such as improved signage, land and hold short lights, precision approach path indicator lights, and high speed taxiways, all of which would enhance this type of operation.

    Evidence of overcrowding at our airports is provided by the increase in runway incursions. A record 319 occurred last year. We would again urge that adequate funding be provided to the FAA to help them prevent incursions through the purchase of airport surface detection equipment at certain low visibility operation airports, new lighting at certain locations, and other similar type measures.
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    Not all of the encounters that threaten flight safety, however, are with machines or even humans. An increasing number of collisions between aircraft and birds or other wildlife are being reported, and they mount up to a compilation of some very serious statistics.

    In 1995 alone, 74 persons have been killed in aircraft worldwide that experienced bird strikes. By the FAA's own estimate over $250 million a year is now being lost to U.S. aviation interests from encounters with birds and other wildlife around the airport environment.

    We recommend several specific measures to address these wildlife hazards and we have the data to show that these measures do, in fact, work. At two of our nation's busiest airports, Kennedy and O'Hare, bird and deer strikes have been reduced by more than 75 percent by very proactive wildlife management programs.

    It has been over a year since the Aviation Rulemaking Advisory Committee made final recommendations to the FAA concerning a notice of proposed rulemaking for certifying small airports. We would encourage the subcommittee to really urge the FAA to move forward on this so that passengers at these airports can receive adequate safety protections in the event of an accident or incident.

    I would like to submit this document for the record at this time, that further explains our position on that, as well as a chronology of the history of the small airport certification to date.

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    Mr. BABBITT. This subcommittee has been most instrumental in helping us achieve progress realized on this issue this far, and we would ask that you help us to complete the situation.

    Concern over airport security has led to massive Federal outlays for access control systems that unfortunately have not, to date, worked. Held up flight crews on their way to work, or for other reasons, need to be replaced. It is quite a choke hold in the overall flow of both passengers and flight crews at airports. The FAA has, in fact, already tested a very successful universal access system at Detroit and Miami International Airports that will significantly enhance security and reduce the need for future Federal outlays for these systems.

    We recommend again that Congress amend the AIP legislation to name the UAS as one of the highest priorities and urge the FAA to expedite its implementation at our nation's busier airports.

    Finally, technology has afforded us many ways to collect and disseminate date for the efficient and safe operation of our air system and we strongly encourage Congress to enact laws that would protect that valuable data from falling into the wrong hands. Real time flight information and data to assess aircraft and flight crew performance are potentially sensitive information that should be provided only, and I emphasize only, to those with a legitimate use for that type of data. They are powerful tools and we would again strongly encourage Congress to legislate to prevent their misuse.

    Again, I want to thank you for the opportunity to allow us to present our views and I certainly will be available to answer questions later. Thank you, sir.
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    Mr. DUNCAN. Thank you very much, Captain Babbitt. Mr. Merlis?

    Mr. MERLIS. Thank you, Mr. Chairman. I appreciate the opportunity to appear before you today to present the views of the Air Transport Association concerning reauthorization of the Federal Aviation Administration.

    I would like to focus today on two particularly important issues, reauthorization of the Airport Improvement Program, and issues related to the recommendations of the National Civil Aviation Review Commission.

    We do not intend to repeat the testimony we provided the subcommittee at a previous hearing opposing an increase in the passenger facility charge. However, since the airport witnesses raised this issue at last Thursday's hearing, we are prepared to do so should you wish to pursue that line of questioning.

    We strongly urge the reauthorization of the Airport Improvement Program at a level of at least $2 billion for fiscal year 1999, increasing annually thereafter. We urge that the program be authorized for 3 years and that Congress adopt a multi-year appropriations process for AIP, a mechanism by which forward funding of the program will result in better planning.

    We also believe that the Airport Improvement Program needs to be modified to reduce some of the complications that have been introduced over the past 15 years. These complexities have resulted in AIP funds not being spent as efficiently as they might otherwise be spent. We recommend that the program be simpler, easier to use, and more logical in its allocation of funds.
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    I am particularly pleased to note that the Air Line Pilots Association and the Regional Airline Association joins in supporting this AIP plan which is attached to my written statement. We believe that our proposal's goals are simple and reasonable. We seek a return to the basics of safety, capacity and noise mitigation. In the interests of time, I will not go over the specifics, however I will be pleased to respond to any questions you have about it.

    Let me also note that some folks in the airport community have suggested that primary commercial airports be excluded from the AIP program. We think that is untenable, unreasonable, and unpardonable. Passengers and shippers using these airports pay in excess of 60 percent of the total excise tax revenues collected to support AIP. Existing formulas already skew against the large airports. We cannot tolerate a situation whereby the generators of so much of the revenue of the program are excluded from the benefits of the program.

    The second area we would like to discuss concerns the recommendations of the National Civil Aviation Review Commission. While I will be focusing my comments on the funding side of the commission's work, let us not give short shrift to the commission's safety report. It stands as a beacon for all interested in gaining an understanding for how the remarkable partnership between government and industry can better fulfill its responsibilities to the traveling and shipping public.

    The commission proposed a transition from the existing excise tax regime to a user fee regime with a process beginning with publication of a proposed fee schedule 15 months from now. In response to that aggressive schedule and mindful of the FAA's lack of a comprehensive financial measurement and management system, the ATA board of directors has adopted a policy position on user fees and taxes.
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    The ATA member carriers believe that there should be no increase in fees or taxes or changes in the current methodology until fully detailed cost and efficiency data are publicly available to justify any increases or reductions in current air carrier payments to finance the FAA.

    We believe that a series of validation and benchmarking studies must be completed and the results analyzed before Congress addresses the user fee/excise tax issue again. We recommend that Congress follow the pattern established in the 1996 reauthorization, in Section 274(a) which required the preparation of an independent financial analysis and that Congress direct the performance of a number of specific analyses.

    First, the adequacy and accuracy of the FAA's cost accounting system needs to be determined. Testing and verifying the reliability of the cost data is especially important due to the FAA's current inability to associate accurately its costs with its activities.

    Let me note that analysis of this sort needs to be performed across the entire range of FAA activities, air traffic control, certification, procurement, security, and inspections. Without an agency wide analysis of the costs of providing services we fear the FAA will continue its current practice of allocating costs to air traffic control users rather than to those who use the services or drive the costs.

    We believe that knowledge and understanding of those costs must be paramount and cost assignment methodologies must be validated to compare alternatives for allocating common costs.
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    Next, Congress should require an analysis of the reasonableness of FAA's costs. This can be accomplished through internal benchmarking and external benchmarking. With internal benchmarking, the FAA would find the best performing units, identify the superior performance factors, and assess the feasibility of improving lower performing units through adoption of practices used in the better performing units.

    For external benchmarking there are at least two types of comparisons which could be undertaken. One with other air traffic control providers, the other with large complex network organizations. With the huge investment already made in the FAA we think it would be prudent to undertake external benchmarking for activities such as property management, telecommunications, network costs, and maintenance.

    We are not alone in viewing these analyses as essential to the long-term financing plan of the FAA. Last week we met with FAA Administrator Garvey to discuss this approach to improving FAA performance and we were pleased to note her receptivity.

    We urge you to include in the reauthorization the analyses or the types of analyses to be undertaken, the identity of who should perform them—some may be most appropriately performed by GAO, some by the inspector general, and others may necessitate reaching out to the private sector—and three, providing a reasonable amount of time in which these could be performed. Then we will all be in a position to use the data to make future decisions.

    Thank you, Mr. Chairman, for the opportunity to present the views of the nation's airlines on these important issues. We look forward to working with you and the subcommittee to implement these recommendations as you move forward on the FAA reauthorization legislation.
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    Mr. DUNCAN. Thank you very much, Mr. Merlis. Mr. Poole?

    Mr. POOLE. Good morning, Mr. Chairman. I am Robert Poole, president of Reason Foundation in Los Angeles.

    As a former aerospace engineer, I have been researching transportation issues at Reason for the past 20 years. Because of our extensive research on air traffic control restructuring worldwide, we were asked to advise the National Civil Aviation Review Commission last summer. And we are generally very positive about the direction of its recommendations for funding of the air traffic control system.

    We agree that without major change aviation gridlock is a real threat. And we agree with the broad restructuring objectives set forth in the commission's funding report. But we have serious concerns about whether the approach they laid out can actually achieve those objectives. Let me elaborate.

    First, we agree on the need for dramatic organizational change. As the commission said, air traffic control should be separated from policy and from safety regulation and put into a business-like structure, run by a strong CEO, answerable to a board of directors. Like a business, the board and the CEO should set policy, hire and fire, set compensation and set prices.

    Unfortunately, though, I do not think the proposed PBO structure, performance based organization, can actually accomplish this. Let me just highlight a few of the problems.
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    First, it is really a conflict of interest—if you are separating policy and safety regulation from operations—it is a conflict of interest to have the chief safety regulator, namely the Administrator, be the chairman of the ATC provider's board. It just does not make sense. You want an arms-length relationship.

    Second, we do not think board members should continue to be political appointees once the ATC entity is up and running. The whole point is to depoliticize what is essentially a business-type function.

    And I think it is unworkable to limit the compensation of the CEO and top management based on how much the FAA Administrator makes. You have got to be able to pay what it takes to attract the best talent in the world to this vital job, these vital top-level jobs.

    The second major point, we agree with the commission that air traffic control funding must be changed so that the resources for air traffic control are based on the growth of aviation and not the constraints of the Federal budget. And we agree that user fees should function as prices, producing valuable information, redirecting resources and so forth. But to do this, the system actually needs real prices, not arbitrarily restricted user fees. To exempt general aviation, for example, by statute, undercuts the pricing mechanism and greatly reduces the benefits that the commission talks about.

    In particular, we think the commission erred in ignoring the distinction between recreational GA and business GA. We all know it is not the Cessna 172s that are the problem; it is the Gulfstreams and the King Airs that use tracons and centers and which should be paying user fees. Most commercialized air traffic control systems overseas charge recreational GA only a small annual service charge or something like that. But business jets and turboprops, which are used for commercial purposes, pay commercial rates as they should.
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    The third major area where we think the commission is on target is proposing that capital investment be funded via long-term bonds, rather than pay as you go. Canada, Germany and other countries are now funding their ATC modernization in this normal, business-like way. The capital markets, however, do not just provide funds, they also screen out projects that are bad investments, which has been one of the chronic problems with the FAA over the past 15 years.

    But for this very reason, this screening function, we are concerned that the commission would permit borrowing from the Treasury which will always face political pressures to approve marginal investments. Most other countries require that their ATC provider go to the private capital markets and justify their projects that require bond funding.

    Finally, we agree with the need to exempt air traffic control funding from the budget process, but we also understand the opposition of the budget committees to making this change. As long as the air traffic control entity remains within the FAA, therefore within the Government, Congress will be expected to subject it to budgetary scrutiny. I do not think there is any way to get around that.

    I think that is another reason to go beyond the PBO concept and create a truly commercial Government corporation funded directly by its users and outside the Federal budget altogether, as other countries have done.

    The PBO is a worthwhile reform for many Government agencies, but for a commercial service on which the aviation industry depends 24 hours a day, the PBO is not sufficiently commercial to get the job done. To have the kind of corporate culture that the commission is trying to create, the organization itself must have control of its own salary levels, it must have control of its pricing, its spending and its financing.
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    Of course, there will need to be strict safety regulation from the FAA and pricing oversight from DOT to protect users and the public. The good news is this kind of commercial corporate culture has been achieved in Canada, in Germany, in New Zealand, and a number of other countries that have systematically restructured air traffic control over the past decade.

    The results are now coming in. Rapid modernization, advanced technology in place, reduced air traffic control delays, and lower cost to users.

    I hope this subcommittee will work to finetune the commission's recommendations along these lines, drawing on lessons from other countries that have actually accomplished the commission's goals.

    Thank you very much, and I will be happy to answer questions later.

    Mr. DUNCAN. Thank you very much, Mr. Poole. Mr. Pittard.

    Mr. PITTARD. Good morning, my name is Michael Pittard. I own and operate an aircraft management and on demand air charter company based in Indianapolis, Indiana and also own Lafayette Aviation, a full-service fixed based operation at Perdue University Airport in West Lafayette, Indiana.

    I am also proud to serve as chairman of the National Air Transportation Association, NATA, the trade association representing the interests of aviation businesses here in Washington and around the nation. On behalf of the nearly 2,000 member companies of NATA and my own family of employees in Indianapolis, I thank you for this opportunity to share with your committee the perspectives of aviation businesses on the reauthorization of the Federal Aviation Administration.
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    It was 2 years ago when this body had the foresight to create the National Civil Aviation Review Commission to examine both the funding and safety concerns of the FAA. Last year, the commission released a consensus document with key recommendations on how to ensure that our nation's air transportation system continues to lead the world in innovation and excellence.

    NATA thanks the commission members for their hard work and especially commissioner and fellow aviation business owner Linda Barker, who despite what some may say did an excellent job representing the interest of all involved in general aviation.

    Today, I would like to share our thoughts on the commission's work and elaborate on key ideas and initiatives that NATA plans to set forth to meet the shared goals of the aviation industry, Congress and the FAA. My comments today will be summarizing points from our written statement.

    First, I would like to state that our association strongly endorses the commission's recommendation for general aviation to continue supporting the FAA and its programs through the current excise fuel tax system. We again urge members of this committee to reject the user fee initiatives in the fiscal year 1999 administration budget proposal. We truly believe, as a community of small businesses, that user fees would be a disaster to our industry and we hope you will reject the user fee concept.

    In regards to small airports, we believe airport capital needs must be met. The association agrees with the commission recommendations on airports, including the need for at least a $2 billion annual authorization for the Airport Improvement Program, referred to as AIP. The report encourages specifically addressing the needs of the smaller airports, recognizing that AIP is essential for capital development at smaller airports, where their capability to draw in a meaningful way capital funds from other sources are very, very limited.
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    The association cites recent findings by the General Accounting Office to recognize that the potential funding difference at smaller airports is more significant than at larger airports.

    Finally, as it relates to small airports, NATA recommends increases in the state apportionment to fund essential planning activities and that the successful state block grant program continues to be available for voluntary participation by all qualified states.

    One of the recommendations of the NCARC that NATA strongly supports is to change the method of taxation for on demand charter companies from the current airline transportation tax to a simplified fuel tax. Adopting this recommendation will enhance safety, simplify excise tax collections, and encourage use of fuel efficient aircraft.

    To give you a specific example, if I flew one of my Lear Jet 35s with seven passengers from Indianapolis to Washington, D.C. on just that one leg alone I would pay approximately $224 in Federal excise tax. If a non-commercial corporation flew its Lear 35 with seven passengers aboard from Indianapolis to Washington, D.C. they would pay approximately $55 Federal excise tax because they are paying on the fuel they burn rather than the passenger tax.

    This is about a 400 percent penalty for commercial operators. We think this reduces our competitiveness and does not create a level playing field. Enhancing the competitiveness of the on demand air charter industry is one of the many positive effects changing this regulation will do.

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    The current tax code is gray, making it difficult to understand the standards between commercial on demand air charter and non-commercial operations that often utilize the same aircraft. We spend a lot of money on paperwork and attorney's fees trying to get the paperwork done properly so our owners of our managed aircraft, when they are flying, do not have to pay the excise tax. Going strictly to the fuel tax would simplify all of this.

    Because of our beliefs, this past February NATA proposed this idea to your colleagues in the Ways and Means Committee as a way to simplify tax collection.

    NATA continues its commitment to enhancing aviation safety and is encouraged by many of the recommendations on safety made by the NCARC. We believe it is necessary to measure safety performance by type of aeronautical activity. FAA should measure its safety performance based upon the individual segments of the industry like airlines, air taxi and general aviation, because of the different risks experienced in those areas.

    In short, we want to be looked at as what we are and not blended in with somebody we are not. We need to have these segments separated.

    For example, in considering flight duty time regulation, while it is unclear exactly what the FAA will release as a rulemaking on flight duty time, the agency's previous attempt was a one size fits all proposal that simply was unworkable for the on demand air charter industry. In my case, and many other cases, had that been adopted we would have had to hire as many as twice as many pilots to do the same amount of business. It would not be a workable situation. One size does not fit all.

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    As it relates to repair stations, Congressional oversight is critical for implementing repair station rulemaking and NATA urges Congress to direct the FAA to address issues of foreign repair stations in the rewrite of the Federal Aviation Regulation Part 145, rather than the current language of H.R. 145. However, Congress should include language in the reauthorization legislation providing some delineation between repair stations working on the airlines versus non-airline aircraft.

    The non-airline repair stations are different from those that work on the airliners. Currently FAR Part 145 does not make such a distinction. Because much of the FAA's initiative to change Part 145 is related to companies performing maintenance for the airlines, NATA contends the FAA should recognize this distinction by separate rules. Again, we want to be separated and recognized for what we are.

    NATA looks forward to working with the committee on this critical issue concerning repair stations.

    Thank you for your time and the privilege to report this to you.

    Mr. DUNCAN. Thank you very much, Mr. Pittard. Mr. Bolen?

    Mr. BOLEN. Thank you, Mr. Chairman. Thank you for the opportunity to be here today. I have submitted written testimony but I would like to just summarize that briefly.

    Mr. Chairman, last month I sent to you, all the members of the committee, and the President GAMA's annual industry review and outlook statement. Thanks to the efforts to this committee on the General Aviation Revitalization Act, our industry is now healthier than it has been in well over a decade and the projections for the future are extremely optimistic. We are very pleased about that and we are very grateful for your work in making that happen.
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    The projections, however, for an optimistic future have as an underlining assumption that general aviation will continue to pay fuel taxes rather than user fees. Last year, we spent a lot of time talking about our opposition to user fees and explaining the reasons for that and explaining how they have not worked overseas.

    We are encouraged by the fact that Congress chose not to move forward on a user fee proposal last year and we are encouraged by the NCARC proposal that would have general aviation continuing to pay a fuel tax.

    I know last week there was a hearing here where the chairman of the NCARC testified and we were very pleased by a lot of what that commission did, and I just wanted to highlight a couple of those things.

    In addition to continuing the fuel tax, the NCARC proposal included a $2 billion AIP funding level which we believe is very important for the future of aviation in the United States. It also continued a general fund contribution, which we also believe is essential.

    As much as we supported those proposals, there were other things that gave us some concern, primarily the proposal for a performance based organization. Our concern about that is really twofold. One is that we believe it creates another level of bureaucracy and further disperses authority in the FAA rather than consolidates it. Two, we are concerned that ithe PBO could create a dual class of citizenship with the commercial carriers at one level and general aviation at another level.

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    It is our position at the General Aviation Manufacturers Association that we are really at a point now where we ought to put the funding issues and the organizational charts behind us. We believe that they are very divisive and they are counterproductive because they take our eye off what is really important, and that is modernizing our air traffic control system. We think FAA modernization is a top priority and we think that is something that the industry can come together on if we are not forced to go back and re-fight old fights.

    The General Aviation Manufacturers Association is very supportive of moving from a ground based navigation system to a satellite based system. To date we have been very supportive of WAAS. We believe it has tremendous potential. We believe that before we move forward on a full-fledged WAAS we should do a beta test of that type of technology similar to what has been talked about in Flight 2000. But we think it is time to move forward on modernization and move away from the same old arguments about funding and organization.

    As you move forward with the reauthorization bill,I want to share GAMA's views on H.R. 145 dealing with foreign repair stations. We are concerned that H.R. 145 may affect our ability to market products overseas and it may interfere with existing warranty contracts between aircraft manufacturers and owners.

    We do not believe there is a safety issue and we believe it could cost U.S. jobs. So for those reasons, I would encourage you not to include H.R. 145 as part of this year's reauthorization bill.

    I also just want to bring up another issue that we are spending a great deal of time on at GAMA, and that is addressing a Federal law that is currently in existence called the Fastener Quality Act which is scheduled to take effect on May 26th of this year. I will be talking to members of the staff a little bit later on the particulars of that, but we believe it is something that an administrative fix is possible for that will prevent industry from shutting down on that date. But if that is not possible, we want to talk to you personally about moving forward on some type of legislative remedy.
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    As I mentioned before, the testimony has been submitted for the record, so I will go ahead and conclude my verbal remarks and look forward to taking any questions that this committee may have.

    Mr. DUNCAN. Thank you very much. Mr. Wytkind?

    Mr. WYTKIND. Thank you, Mr. Chairman, Mr. Lipinski. Thank you for having transportation labor appear before the committee.

    At the outset, we want to say up front that we look forward to working with the committee to make sure that whatever FAA reauthorization bill comes out of this committee is one that we can enthusiastically support. No issue is more important to aviation workers than ensuring that air travel continues to be as safe and secure as possible.

    Toward this end we share the NCARC's insistence that more must and can be done to ensure that safety does not suffer as the aviation travel industry continues to flourish as we want it to flourish.

    Up front we endorse the call by the Airline Pilots Association and several elements of the industry to make sure that the AIP program is funded at a level commensurate with the expectations that the nation places on the system. $2 billion or more is a number that we would endorse as well.

    I will summarize two or three of our key issues. First, we must change the way that the FAA certifies, regulates, and oversees foreign aircraft repair stations. It is ridiculous that a foreign station can get certified to work on a U.S. aircraft without demonstrating that that aircraft will be engaged in international travel and without necessarily meeting the basic safety standards that are imposed on the U.S. facilities and on the workers employed at those facilities.
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    The results of the misguided policy that was changed about a decade ago are easy to see today. We have hundreds of foreign stations, many of which are not needed, and those stations are taxing the FAA's already stretched inspection and oversight resources.

    The question is simple. Will this committee continue to allow a policy to remain in the books that directly threatens aviation safety? Or will it use FAA reauthorization to address this issue and restore common sense to the way in which we oversee and certify foreign repair facilities?

    The policy changes needed are embodied in H.R. 145, bipartisan legislation authored by Representatives Borski, Shays and English, which now enjoys the support of a strong majority on this committee, and the total co-sponsorship is approaching 170. In addition, the nation's two largest carriers, United and American, have expressed their support for this legislation. We would urge adoption of this measure as part of FAA reauthorization.

    The committee must also insist that aviation employees finally get the whistle blower protections they need and deserve. It is hard to imagine that there are still no Federal laws or policies which prevent aviation workers from being fired or unfairly disciplined simply because they report legitimate safety concerns.

    The NCARC is to be congratulated for recognizing the chilling effect that this is having on aviation safety and for supporting whistle blower protections for all aviation employees who step forward to report breaches in safety. We believe it is contrary to sound aviation policy to ask workers to choose between their jobs and safety.
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    Representatives Boehlert and Clyburn, who is at this hearing, have introduced the Aviation Safety Protection Act, H.R. 915. We strongly endorse this legislation and it also is enjoying a growing bipartisan level of support. Simply put we cannot, on one hand, have an FAA bill that seeks to improve aviation safety and, on the other hand, tell aviation workers that their input on safety is not welcome.

    Regarding small airport certification, which was mentioned earlier, we must complete the work that began in the 1996 FAA bill, when Congress took the leadership and wisely gave the FAA the authority to certify airports that service planes with 30 or fewer seats. Unfortunately, the FAA has so far failed to issue regulations that are needed to set the program in motion.

    Knowing Congress' interest, it is our hope that the committee will work with the FAA to ensure that this rulemaking is initiated without further delay.

    A growing problem confronting passengers, which was raised by President Babbitt of the Air Line Pilots Association, is the increase of wildlife strikes on aircraft which has resulted in thousands of life-threatening incidents and hundreds of millions of dollars of damage. This hazard is largely preventable and, in fact, a number of airports have instituted programs that have greatly reduced the threat.

    However, not all airports have adopted these programs. Many airlines have not taken adequate steps to address the problem and most airline pilots are not trained in avoidance procedures. I know that ALPA is taking a leadership role in this issue and we join with them as an affiliate of our department in urging the committee to examine ways that this issue can be dealt with in a forceful way.
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    Another point to raise is while we are not aware of any efforts to expand the current airport privatization program, we want to underscore our deep concerns with a policy experiment currently underway and continue to register our opposition to those who would turn over America's airports to private interests at the expense of safety, service, and the rights of airport employees.

    As far as FAA employee issues are concerned, I know that both PASS and NATCA, the air traffic controllers association, have provided the committee with excellent testimony on key issues. Simply put, Congress must make a long-term commitment to support these employees.

    I want to place special emphasis on the need to ensure that these workers are afforded the basic right to send outstanding labor-management issues to the Federal Service Impasses Panel and to have grievance complaints brought before the Merit System Protection Board. These basic rights have been denied for these employees for far too long and we strongly call on Congress to correct what we believe is an injustice and a very unfair situation.

    In addition, we would urge the committee to resist any calls to institute and encourage misguided proposals to contract out the work of the skilled FAA employees who currently perform these jobs. They are highly skilled. They are highly trained. They have committed 10, 20 or more years of service to this business and they should be treated not only fairly but with the respect they deserve. FAA employees cannot be cast aside by those who would seek to contract out jobs that they can do better and more efficiently.

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    It has been demonstrated time and again that these schemes do not work and I suspect for many these are motivated more by some erroneous assumptions than by sound policy judgments.

    Promoting aviation safety and treating the FAA work force with respect cannot be accomplished until we change the way Congress funds and supports the FAA. It is a simple concept that is called for by others. If the users and beneficiaries are going to pay for the system and provide the money to support it, then the money should be used for those purposes. We support calls to make sure that the funding levels are at the highest levels, and more importantly that we shield the financing part of the FAA from the politically charged budget making process on Capitol Hill.

    It must be remembered that aviation workers have an up close seat to observe air travel in motion every day, and therefore have a unique prospective that policy makers must consider.

    In closing, I believe that the proposals we have submitted and the proposals submitted by many of our affiliates are the result decades of experience and we urge their serious consideration and adoption. Toward this end, we look forward to working with you, Mr. Chairman and members of the committee, to bring forward a strong bill that we can support and that we can work towards its passage. Thank you.

    Mr. DUNCAN. Thank you very much, Mr. Wytkind.

    Mr. Ewing?
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    Mr. EWING. Captain Babbitt, your testimony called for surveys and studies into the problems caused by collisions between aircraft and birds. I am sure it seems hard for many people to believe that a bird can cause that much of a danger to a large aircraft. Could you explain that a little more, go into a little more detail for us? And also explain the studies and the surveys that have been made?

    Mr. BABBITT. Yes, sir. I guess the physics of the problem would be the best place to start. These type of incidents happen most typically in the take-off and landing phases at lower altitudes. I, myself, have personally encountered several bird strikes, one time hitting—with all deference to our neighbors to the north—a Canadian goose at a speed of about 300 knots and it put a hole in the leading edge of a Boeing 727 that was about 18 inches across. It disabled the leading edge devices on the wing, we lost the hydraulic system associated with that device, and we were at a fairly high altitude.

    These happen almost daily. The geometry of a bird of eight to 10 pounds being struck at hundreds of miles an hour are quite substantial.

    What we have seen is our own United States Department of Wildlife, through Agriculture, they understand the migratory patterns. There are things that can be done. There are arrangements that can be made, climb profiles to avoid these, devices placed on airports not to harm the animals but to simply keep them away from the operating environment.

    You may have noticed in and out of Washington National, for example, they fire air cannons to scare the birds away. Unfortunately, the birds get attuned to those cannons after a while and they are not terribly troubled after a few years. But there are things that can be done, and we are suggesting that—our empirical studies show that they are very effective.
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    For example, at Kennedy Airport they have reduced significantly, in the range of 75 percent, the number of animal strikes that have been incurred.

    Mr. EWING. You mentioned in your example, before that, that it happens generally on take-off or landing. I assume that is because the birds are generally at a lower level than a cruising altitude might be for a big plane or a small plane. Is that true?

    Mr. BABBITT. That is correct, but there is actually a high number of incidents actually on the ground. For example, deer. For whatever reason, rabbits seem to be particularly fond of airports. I guess there is a lot of grass growing between the runways. But those type of animals are quite often ingested, literally ingested when a large turbine powered aircraft applies power at a low speed. The engines are drawing a tremendous volume of air into the intake and a small creature, rabbits, foxes, are quite often ingested.

    And again, there are techniques available and wildlife control methodologies to keep these animals away from the operating environment of the airport itself.

    Mr. EWING. It could also be that the airport is kind of a safe haven from predators for those animals, such as dogs and other predators. But when you mentioned the Canadian goose that hit the airplane, was that at a high altitude?

    Mr. BABBITT. It was about 7,000 feet and this was prior to the time, if you are really concerned, at the time we have changed one rule. Aircraft are no longer operating below 10,000 feet at those speeds. But at the time of this particular strike you could operate at any speed you wished and we happened to be at climb speed at about 7,000 feet when we hit this goose.
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    Mr. EWING. Is this a problem that is handled, that we can handle? I mean, should it be in the siting of our airports or is it in really the maintenance of the animal after the airport is built and operating?

    Mr. BABBITT. I think the latter would be more appropriate. Certain climb profiles and certain knowledge of migratory patterns are helpful. But I think once an airport is built—I would note that we have also seen a tremendous increase in the number of migratory birds. The explanation of that is beyond my knowledge, maybe perhaps we are tracking them better, but I do know that there are far more incidents than could be attributed to simply more aircraft operations.

    And from what I am led to understand, our wildlife conservation people within the Federal Government certainly have adopted some very effective ways of dealing with the problem and I suggest that we perhaps could implement those at a great saving of time, exposure to damage, and of course the safety of passengers and the crews underlying all of that.

    Mr. EWING. My time is up, Mr. Chairman, thank you.

    Mr. DUNCAN. Thank you very much, Mr. Ewing. Mr. Clyburn?

    Mr. CLYBURN. Thank you, Mr. Chairman.

    Mr. Chairman, I do not have any questions but I would, if you would indulge, I want to highlight two things. I think all of us, especially on this committee, are very knowledgeable about funding and we also understand the concerns about funding. However, I do think that what seems to be a common theme here this morning, as it ought to be, and that is the whole issue of safety.
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    I am proud to be, of course, one of the 170 cosponsors of H.R. 145, I believe it is, and of course, as you know Mr. Chairman, I have since the 104th Congress been very interested in what is now H.R. 915. I am really hopeful that these two pieces of legislation because of its value, I think, their value to the overall safety of air travel, or in fact incorporated in our reauthorization.

    I have talked to flight attendants very often about the whole issue of whistle blower protection and there is a tremendous amount of anxiety on the part of flight attendants. I think it is rather interesting, as I travel the highways I can see these bumper stickers and other signs on the side of the road, with the numbers of hotlines for people to call to report people who are traveling above the speed limit or people who may be driving erratically, and there is all kinds of protection for people to make these kinds of reports.

    Yet we seem to be a bit reluctant to protect those people who work in the airline industry when they feel a bit anxious about whether or not they will be protected if they report things that they see and feel may violate safety standards.

    So I just wanted to put in a pitch for these two pieces of legislation to be included in our reauthorization, Mr. Chairman. I appreciate you letting me make that statement.

    Mr. DUNCAN. Thank you very much, Mr. Clyburn. Mr. Pease?

    Mr. PEASE. Thank you, Mr. Chairman, members of the panel.
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    I am one who tends not to look for controversy. Enough finds us without looking for it, but last week we had an interesting interchange, and I guess it has been going on for years, between the airlines and the airports regarding the passenger facility charge. I am just wondering if representatives of organized labor want to get into this discussion also, and tell us if you have a position on raising the passenger facility charges?

    Mr. BABBITT. Thank you for that kind opportunity to join the fray. Fundamentally, we are of the belief that the AIP funding itself should be the core of funding for the safety issues. We can accept the level that exists today of the PFCs. I have heard a suggestion made that to go beyond the cap of $3, it might be appropriate to have dialogue at a specific airport with the specific carriers involved and if there is a consensual view that it should go forward, that is something we can live with. But we are concerned of any diversion of airport funds in that sense.

    And of course, on the other side, we are simply moving the tax burden itself around. We acknowledge that some need exists there. You are simply arguing over who is actually overall going to bear the burden. I guess that would summarize our position.

    Mr. PEASE. Mr. Wytkind, do you want to comment?

    Mr. WYTKIND. I do not think I could say it any better. As usual, the president of one of my affiliates is the more courageous out of the two.

    We strongly have supported, from an overall financing standpoint, efforts to make the AIP program as strong as possible. This debate that it is going on in the industry, we have not taken a position on, but what we have said tracks along the lines of what Captain Babbitt has said. What we should be focusing on is how do we fund safety? If we have to fund a safe industry with some reforms, such as some of the changes in policies recommended by the Mineta Commission on these issues, we ought to look at them and move forward.
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    But our focus has been on what I think should be the core focus of everyone, which is how do we fund an industry at the level it needs to be funded, and how do we make sure that safety standards continue to remain at the level they are while the industry continues to grow? And those are goals I think most people would support.

    Mr. PEASE. I appreciate that. I did not want to exclude anybody else from participating in this if you want.

    Then let me proceed. Both of you mentioned the Airport Improvement Program. There are a number of us who are concerned about the inability of many airports, no matter their size, to fully fund the things that we all agree need to be done, but it seems to be more acute in medium and smaller sized airports. They tend to have fewer resources, or other alternative resources, available to them. So there has been some discussion about finding a way to shift some of the AIP resources more to that end of the scale.

    Do you have any thoughts on that subject?

    Mr. BABBITT. Yes, sir, I do, and I appreciate your raising the question.

    I guess fundamentally one of the troubling pieces that we see here, as AIP funds are distributed, is we have something approaching 80 airports in this country that are not certified whatsoever. They are uncertified airports. And yet they receive jet traffic, they carry passengers in and out of those.
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    What we have created here is a disparate level of safety. I know this committee was very helpful to the Air Line Pilots Association in promoting what we called at the time One Level of Safety, and that had to do with the certification of crews and Federal regulations regarding flight crews.

    I would suggest that the committee give very serious thought towards urging the FAA to adopt similar standards for airports.

    One of the most troubling aspects of this, it is hard to imagine in this country, but a passenger has no knowledge whatsoever whether or not they are operating into an uncertified airport. It just seems to me that the Congress of the United States has a fundamental obligation to provide a basic level of safety at all airports.

    Passengers expect it. They come to believe that they are a passenger on a U.S. carrier operating, well-known, and yet they may very well find themselves operating into an airport that might not even have fire and rescue equipment, and they have no knowledge. They are not warned of that fact whatsoever.

    Mr. PEASE. Do others have thoughts on the AIP distribution, particularly as it deals with medium and smaller airports? Mr. Merlis?

    Mr. MERLIS. I think the proposal which we have put forward has a reasonable balance between the sizes of the airports, the needs of the airports, as well as the sources of revenue. Last week Colonel Griggs, who runs St. Louis Airport and is the former associate administrator of airports testified that $120 million a year is raised for the Aviation Trust Fund from passengers and shippers traveling through St. Louis. He said, and I thought it was quite reasonable, it is not too unreasonable for St. Louis to get maybe $12 to $15 million back.
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    I think the current formula does not even do that. To change it anymore or skew it anymore would really be a disservice to those airports and those individuals who are paying the burden of the tax or who are carrying the burden of the traffic.

    Mr. BOLEN. I would simply comment that your observation that small and medium airports have significant needs and those needs must be addressed is absolutely accurate. One of the things we found is that a little bit of money can go an awfully long way at a small airport, and it is absolutely essential because of the lack of other options that are available.

    The air transportation system in the United States is an integrated system. It depends on all of our airports forming a viable link with each other. I think that making sure that the needs of the small and medium sized communities are addressed is entirely appropriate.

    Mr. PEASE. Thank you. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you. Mr. Lipinski?

    Mr. LIPINSKI. Thank you, Mr. Chairman. I want to welcome all our panelists, particularly our perpetual panelist over here, Mr. Merlis. It is a pleasure to see you again. Maybe we could schedule a meeting tomorrow at my office to talk about aviation, and I will get to see you another time.

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    I will start out with Captain Babbitt over here. Captain, you were saying that in regards to this wildlife problem, that Kennedy Airport cut it down by 75 percent?

    Mr. BABBITT. Yes, sir.

    Mr. LIPINSKI. Could you tell me how they did that?

    Mr. BABBITT. They adopted plans that were suggested by the United States Department of Agriculture in their wildlife division. I am not intimately familiar with the details of that proposal, but I am sure it involved a series of steps in wildlife management that, of course, they are expert in.

    I would also note that the USDA would like to conduct surveys at major airports around the country to develop a database of information to even better manage that. Of course, that would need to be funded, which is a perpetual problem.

    But I think that as they develop more knowledge and develop better techniques, using a variety of pieces of technology, in some cases simply rerouting aircraft on departures. For example, one of the problems that exist is quite often the area around an airport is convenient for the disposal of trash from the community. Anyone who has driven by or flown over such a facility knows that it attracts seagulls, especially in seaside locations.

    There are things that you can do in that environment, bulldozing and things of that nature, that minimize the attraction of animals to those places.

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    I would be happy to provide the committee later with more detailed analysis. I apologize for not having intimate knowledge myself of what the techniques are. I simply know that they were suggested, a; and b, adopted; and c, are proving to be quite effective.

    Mr. LIPINSKI. I would like to see what those specific proposals were. I think it is a very interesting area and I think it is an area that has been neglected and we have to do more work there. I appreciate you bringing it up.

    Mr. BABBITT. Yes, sir. I will make it a point to make certain that your office and the whole committee, if you would like, gets a copy of what we can ascertain is being utilized.

    Mr. LIPINSKI. Ed, you are opposed to an increase in the PRC; correct?

    Mr. MERLIS. Correct.

    Mr. LIPINSKI. You are opposed to user fees; correct?

    Mr. MERLIS. We are opposed to changing the current system until the Congress ascertains information about the FAA's costs, evaluates it, and then can make an intelligent decision.

    Mr. LIPINSKI. With your vast experience in the aviation industry, do you think can ever get to a point where we will be able to fix the costs well enough that a user fee system can be justified to people such as you?
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    Mr. MERLIS. Well, it is not me to whom it has to be justified, it is to the air carrier members of ATA ultimately. But I do think you can ascertain those costs and then lay it out and then let the games begin. The problem we have today is we do not know what drives the costs, how those costs are driven, and so these debates about the fairness of how the costs are put back on the users constantly crops up.

    Mr. LIPINSKI. In light of all of that, and the fact that most people in the aviation industry, even people who are on the periphery, seem to believe that AIP needs about $2 billion a year, and the present year it is being funded—or it was being funded at $1.7 billion. Now the House leadership has decided to cut $275 million out of that and bring us down to $1.425 billion for this year, do you have any ideas how we might be able to handle the problems that we have facing us with not meeting the $2 billion in the first place, but this additional $275 million reduction?

    Mr. MERLIS. I think one of the things this committee has done, in getting trust funds off budget, might go a long way towards being able to spend the monies that are collected. By September 30th of this year, the uncommitted balance in the Aviation Trust Fund will exceed $4 billion and if you are not going to spend the money in the fund, then the least you ought to do is cut the taxes. And if you did that, then maybe people would be interested in figuring another way to do this financing.

    But last year there was a $4 billion tax increase. At the end of this year there will be a $4 billion uncommitted surplus. And as you say, they are still not funding it at the full level. So why do we keep getting taxed if the money is not going to be spent for the purpose for which it is collected.
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    Mr. LIPINSKI. It is being spent to reduce the budget deficit. You know that and I know that, and you know that none of us here have anything to do with that, unfortunately. We continue to try to fight that process, but we have not been successful and I do not foresee us being successful in the immediate future.

    So even though your suggestion is a very good suggestion on how to do it, it is really very theoretical and not very practical at the present time. Do you have any more practical solution?

    Mr. MERLIS. Well, I just think we have got to bite the bullet and make it practical. The fact of the matter is that the American people are being taxed and overtaxed, and if we raise the PFC they will be taxed even more because we did not spend the taxes collected in the first instance.

    I would also point out that the $300 million shortfall between the $2 billion and the $1.7 billion appropriated, is not easily remedied by an increase in the PFC. The reason I say that is because of the allocation formulas only certain airports can really benefit from an increase in the PFC. Very small airports certainly cannot.

    Secondly, because the average PFC runs for 10 years, $1 increase in the PFC raises far, far more than the $300 million shortfall this year. So to address the 1-year problem by taking a 10-year fix, we think is a little bit of overkill. Let us, over the next year or 2, try to fix this trust fund problem and then maybe we will not have it again.

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    Mr. LIPINSKI. Are you aware of the fact that, in regards to the Highway Trust Fund, we are passing this big highway bill, BESTEA, and that there is $29 billion in that Highway Trust Fund that the House leadership has just decided is going to go out of the trust fund to reduce the budget deficit. So if they can take $29 billion out of that one, they can certainly take $4 billion out of aviation and do the same thing with it.

    Mr. Chairman, I do have questions for the rest of the members of the panel but once again, Ed's eloquence and wisdom has delayed me in getting to them, but I will get to them on the next round. Thank you.

    Mr. DUNCAN. Thank you. Mr. Bass?

    Mr. BASS. Thank you very much, Mr. Chairman.

    I would like to apologize for having come a little bit late to this hearing. It is certainly a very important hearing and, having had a moment here to review some of the testimony, it is excellent testimony.

    I have a couple of questions here, first for Mr. Poole. You discuss in your testimony the recommendations of the National Civil Aviation Review Commission. You mention in the end the fact that their recommendation that the air traffic system should be placed in a performance based organization, a PBO, which would make the agency more results oriented and Federal managers more accountable.

    You say, in your testimony, that the PBO is neither fish nor fowl, half Government, half independent, and it does not quite do the trick. I understand from that then that you support corporatizing or privatizing the ATC system.
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    I guess my question is I believe that Canada corporatized their ATC system.

    Mr. POOLE. Correct.

    Mr. BASS. And the government assured the public that safety would not be compromised and NavCanada's 3-year plan outlines a goal to trim 17.5 percent of operating costs, which they believe means they will have to lay off employees. And some in Canada feel that the NavCanada's downsizing efforts have gone too far.

    If the U.S. sold our ATC system to an independent corporation, as you recommend, how would we be sure that incentives to downsize would not compromise safety?

    Mr. POOLE. Our proposal from 2 years ago is to sell or divest the air traffic control function to a user-controlled corporation, which would be the safeguard because the interest of the users is—certainly safety is paramount. I am sure none of Ed's carriers or any of the members of NATA want to see anything done, any trade-offs made that would reduce the safety level of the system.

    On the other hand, they also have an incentive in getting the costs down—in not having excessive layers of management that are not really productive. They also have an incentive in getting advanced technology that may indeed make possible over time a smaller number of personnel, which has been achieved in several of the other companies overseas. Canada is merely the latest one to attempt to do the same thing.
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    So I think you obviously need to have safeguards of those kind, but I think the interests of the users are very clearly in favor of making sensible trade-offs on that score, of how to modernize and take advantage of higher productivity without, in any way, compromising safety.

    Mr. BASS. What kind of safeguards would you recommend?

    Mr. POOLE. Well, I think it really is aligning the interests. If you have say a board of directors that represents all of the principal user groups in true policy making fashion, that have to approve the investment plans, that have to approve the user fee schedules and so forth, and structure that to protect the smaller users so that they are not automatically outvoted by the larger users and so forth, I think you will have built in the kind of incentives needed to work for both productivity improvements and safety improvements rather than risk any compromises on safety.

    You would just align the interests of all the parties in such a way to make those trade-offs in a sensible fashion.

    Mr. BASS. Mr. Chairman, begging your indulgence, I hope this question has not been asked. It is a question of Captain Babbitt.

    The last reauthorization, at ALPA's request, FAA was directed to study the safety implications of the practice of some airlines to require pilot applicants to pay for their own training. FAA recently issued that study and found that this so-called ''pay for training'' would not adversely affect safety. Do you have any reaction to that?
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    Mr. BABBITT. Our fundamental concern in that issue was that we were not so concerned with the fact that someone was paying for it. Ultimately someone pays for all training. We understand that. What we were concerned about, and expressed directly to the FAA and obviously before this subcommittee, was the issue that this was an improper filter or restriction of qualified applicants.

    Therefore, the people that would migrate into commercial aviation, take the entry level jobs that would eventually take them to command of large aircraft in this country, was artificially blocked by a financial barrier. We felt that that is, in fact, a restriction.

    To put it in a nutshell, if you have a very well qualified candidate who simply does not have the additional cash necessary—in some cases $9,000, $10,000, $12,000—to go out and obtain and rating, that person is not going to be considered for the job, whereas someone who is from a well-heeled family and perhaps not as well qualified as an aviator, might well get the job.

    We still think that that is a fundamental flaw in the hiring practices of today's carriers.

    Mr. BASS. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Mr. Bass.

    Mr. Bolen, I think it is fair to say that the American labor movement prides itself on trying to protect American jobs and yet they have listed as their first priority, in Mr. Wytkind's testimony here this morning, that they would like to see H.R. 145 passed. Yet, you said in your testimony that H.R. 145 would cost U.S. jobs.
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    Would you explain that to us, how you feel it will cost U.S. jobs?

    Mr. BOLEN. The statement that it will cost U.S. jobs is based on a belief that foreign countries could retaliate against the United States, placing restrictions on the use of U.S. repair stations by foreign-registered aircraft. I think you held a hearing last October, I believe it was October 9th, on this issue and significant evidence was presented to that fact. I do not think that can be taken for granted.

    Mr. DUNCAN. Mr. Wytkind, do you want to comment on that?

    Mr. WYTKIND. First, I was at that hearing and it may have been a different hearing, but there really was not much evidence at all. There has been an idea advanced by those who oppose the bill that somehow there will be a lot of retaliation. Meanwhile, while those predictions keep coming forward with no evidence, we do have evidence that not only are safety standards compromised in a lot of foreign repair facilities, but that work is leaving this country.

    Are they laying off hundreds or thousands at a time at the major air carriers? Of course not, the industry is booming. But every day we get reports from the International Association of Machinists and the Transport Workers Unions, the two major mechanics unions, where they are outsourcing work, some of the major carriers. It may just be a couple of 747s here and there, but after a few years of that it translates into hundreds if not thousands of man-hours on aircraft.

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    So for us, we focused on the safety issues because they are real. They have been proven. They have been pointed out even in the GAO study, which I thought did not go far enough, in terms of what it actually looked into. But we also recognize that there are real labor issues here, real worker issues, and they cannot be denied because all these other things are just threats that we have been hearing about for 10 years. And quite frankly, we do not see a lot of work coming into the country and to the major employers that we represent employees at. So I do not really recognize what Mr. Bolen is referring to.

    Mr. PITTARD. Mr. Chairman, I wonder if I could just make one comment?

    Mr. DUNCAN. Yes, Mr. Pittard, you sure can.

    Mr. PITTARD. Just a short comment to the fact that it is our understanding that the JAA is already looking at ways to retaliate if H.R. 145 does go through. I just wanted to mention that.

    Mr. DUNCAN. Mr. Bolen, you have got my curiosity up because I think this Year 2000 problem is one of the craziest things I have ever heard of. I read several months ago in Newsweek, though, that all of the various associated costs, not just the Governmental costs, but the cost to private industry and so forth, that the costs may reach over $1 trillion before we're all through and prices on everything are going to have to go up.

    I have heard all of these—some people are predicting that financial institutions are going to have problems. I have even heard people say do not fly, do not get on a plane late that night. I mean, it is really something.
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    You got my curiosity up when you said that you want to talk to the staff about a proposed legislative remedy for the Year 2000 problem. Do you have something specific in mind?

    Mr. BOLEN. No, Mr. Chairman, that was not on the Year 2000. That was something known as the Fastener Quality Act, which is a different piece of legislation but one that is set to take effect in the next couple of months and one that we believe that, as it is being broadly interpreted by the regulatory authority, is going to have a significant impact on manufacturers ability to produce products, that we see a potential shutdown as imminent given the broad regulatory interpretation of the statute.

    Mr. DUNCAN. I see. Mr. Schaffer and I misunderstood. We thought you were talking about the Year 2000 problem.

    Mr. Poole, you may have heard Mr. Bolen say that a performance based organization is just another level of bureaucracy and that it would make general aviation second class citizens. That is something that we have heard frequently about user fees and recommendations such as you have made.

    What would you say in response to that?

    Mr. POOLE. Let me take the second class citizen issue first. I have had discussions with Mr. Bolen, with other heads of general aviation organizations on this. I think there is a sense of wanting to have your cake and eat it, too.
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    I mean, I think if a segment of the aviation industry wants to seriously have a seat at the table, in influencing the governance and the policy making of the air traffic control provider organization, they ought to be a paying customer. So there is a fundamental decision there for those involved in various phases of air transportation. If they want to be a player, they need to have a seat at the table, and that means being a paying customer.

    I think you cannot really have it both ways, of wanting to make significant inputs about, ''This is the way it should be governed, but we want to have still have a special deal and not really pay for it'', particularly those who operate corporate aircraft that are used for commercial purposes, which is mainly turboprops and business jets. They are essentially providing alternatives to airline services. They are using air traffic control resources in the very same way that a 727 or a 757 is, and they ought to be paying for it on the same basis.

    There is really no justification that I can see, from a public policy standpoint, to have them pay a low fuel charge when they are providing essentially the same services—and competing unfairly with NATA members. When a corporation is flying its own executives around on its own jet, as opposed to a chartered Lear Jet, it just does not make sense for them not to pay.

    I think Mr. Pittard is absolutely right that it is unfair, but I differ with his recommendation of the way to fix it. I think the way to fix it is to charge them both a normal commercial-type of charge, whether that is a ticket tax or a user fee, but not to basically exempt them both from paying anything but a small fuel charge that does not come close to relating to the real cost to the system of safely guiding that craft through the sky.
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    Mr. DUNCAN. What do you say about Mr. Pittard's charge that user fees would allow unfettered spending by the FAA? In fact, he says the motivation in user fees is to avoid the spending caps put into place through the budget process. What do you say about that? He says a user fee would theoretically avoid this restriction, allowing unfettered spending by the FAA.

    Mr. POOLE. I agree, the recommendations are all of a piece. I would not support a generalized shift to user fees, just as an additional source of de facto tax revenue to the existing FAA organization. I think the concept of user fees make sense only in the context of a separate commercialized air traffic control operation, which could start from the concept of a PBO as laid out by the commission.

    But I think for the reasons I laid out in my testimony and at somewhat more length in the written version, you need to go beyond the constraints of a PBO to a more fully commercialized approach, that runs like a business, that takes in revenues from its customers and spends them exclusively, 100 percent, on operating and investing in the ATC system.

    That provides the safeguards. That is a kind of closed-loop funding system, if you will, where the money only goes into the service of making a safe and effective and productive system for all the users.

    Mr. DUNCAN. Mr. Pittard, have you—Mr. Poole earlier mentioned, in a favorable way, the systems in Canada, New Zealand, Germany. Have you looked at those systems to any degree? Or Mr. Bolen, do you want to make any comments about some of the things he has just said, or about the systems that they are trying out in these other countries and how they are working?
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    I mean, I hear pilots sometimes say that general aviation is almost non-existent in Europe or other parts of the world.

    Mr. BOLEN. Mr. Chairman, I think it is interesting that New Zealand is often brought up as a real model that we ought to try to follow. Mr. Chairman, there are exactly seven general aviation turbine powered aircraft in New Zealand. It is hardly a model that anyone wants to follow.

    General aviation is not anywhere near as robust as it is in the United States anywhere else in the world. It is that way by a factor of, in some cases, 10 and more.

    I would like to address a couple of things that Mr. Poole said earlier regarding general aviation. The fact of the matter is general aviation does provide a strong benefit to the United States and that has been recognized by Congress. It is the primary training ground for the commercial airline industry. It serves a lot of communities not served by the commercial air carriers.

    So I think part of our concern about the performance based organization and part of our concern about the user fees is it does not really take into account the benefits and it oftentimes does not really take into account our ability to pay. There are certain segments of the general aviation industry which are already priced out of the market. Costs are a major driver on our ability to maintain a robust system. Looking at trying to increase that, I do not think, is appropriate.

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    I also want to address his comment about turboprops and Gulfstreams going as competition to the commercial airlines. Commercial airlines serve somewhere in the vicinity of 500 airports in the United States. General aviation serves 5,000. We are often not going anywhere near where the commercial airlines are going. We are also working on different schedules at different times.

    So to simply say that the people that are flying general aviation are doing it as an alternative to commercial airlines really does not understand the industry.

    Mr. DUNCAN. Mr. Pittard, anything you wish to add?

    Mr. PITTARD. I would mention that NavCanada is so new it is pretty hard to judge right now whether that is a good deal or a bad deal. I will agree with Ed on his comments 100 percent. And there has also been a few countries that have been left out, that user fees have failed in. So I think they are somewhat highlighting some of the ones that they think may have been successful.

    But the general aviation in the United States compared to anywhere else is night and day. It would be hard to compare Europe or anyplace else with the United States on the activity and freedom of flight. I think we have to deal with what is here and how it is going to affect us.

    Mr. DUNCAN. Mr. Poole, you say that the 1996 reforms that we tried to put into place about the FAA's personnel and procurement systems have not really improved the FAA's management style and corporate culture. I noticed, Mr. Merlis, that you say at one point in recognition of the FAA's lack of a comprehensive financial measurement and management system.
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    Do you agree, or are both of you telling us that these reforms that we attempted to put into place in regard to the FAA personnel and procurement, that they really have not been effective? Do you think they have had enough time so that we can really tell how they are going to work?

    And if these are not working, or are not going to work, what should we do differently? What can we do differently in this legislation?

    Mr. POOLE. It is a bit early to make a sweeping judgment. However, I think the recent GAO report highlighting the continuing huge problems with WAAS, for example, and a number of other things suggest that the situation has not fundamentally changed, in terms of the corporate culture of FAA, particularly in their R&D and procurement efforts.

    I talk to a lot of people who work as consultants to FAA and in various aspects of aviation, and their general assessment of the problem of the corporate culture not being anything like a commercial user-responsive organization, are not any different than they were 2 years ago, 5 years ago, 10 years ago. So my preliminary assessment is that these things really have not fundamentally changed the picture, and that you have got to align the incentives of the organization with serving its customers.

    I think the commission's recommendation of a PBO is an attempt to do that, to change the design of how the entity relates to the users. But again, for the reasons I have laid out, particularly in my written testimony, I do not think it goes far enough to really accomplish that.
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    Changing a corporate culture is not an easy thing to do, but we have seen it happen. This is the good thing. The good thing about New Zealand, as tiny as their system is, but also about the U.K., about many of the commercializations, or corporatizations, or privatization in the U.K., in Germany, in a number other countries, is that in a span of 3 to 5 years we could see dramatic changes in corporate cultures. Things that were stodgy, bureaucratic state agencies become real commercial enterprises that aggressively look for ways to be more cost effective, to trim management layers, to get rid of deadwood, to lower costs through longer term investments in technology that really is what users want, not something the users do not want like a microwave landing system, for example.

    So I think there are lessons that are out there. I think there is a lot that we could do, but it is going to require bold steps, not just small tinkering steps.

    Mr. DUNCAN. Mr. Merlis, what would you do? You say the lack of a comprehensive financial measurement and management systems, implying that a major change or changes need to be made.

    Mr. MERLIS. I think that the FAA has underway today some of those changes which need to be instituted. They have a cost accounting system which is being implemented, which should be implemented supposedly by October 1st. They have their procurement reform system. Let us give it a chance to work.

    I do not think they have done that much with the personnel reforms. Particularly disturbing is the failure to appoint a management advisory council which would give aviation interests an opportunity to work with the administrator on the financial plan, the business plan of the entity. And so if we were to change today to something else, are we going to go through another 18 months with nothing being done?
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    I think we might be better off staying with what we have, doing the analyses of what is transpiring at the FAA today, and making a decision at the end of that day, rather than changing systems before we have had a chance to let this one come to fruition. We have a new administrator. I think the 5-year term, which this committee was behind, can have a very, very significant role in fostering cultural change.

    Rather than jumping ship today, I think we ought to have the changes which you enacted 2 years ago, or 18 months ago, come into play and then take a look at it.

    Mr. DUNCAN. We tried to indicate to Ms. Garvey last week that we wanted her to try to move a little bit faster in appointing that management advisory council.

    Let me ask you this, though. Last week we heard from some of the airport community and some of the larger airports seemed to indicate that they would be willing to give up a substantial portion of their AIP funding if they got an increase in their PFCs. And yet you have this recommendation, the ATA has this recommendation for changing the distribution of the AIP funds, but it really makes just almost minuscule changes.

    In other words, the percentage that would go to primary and secondary commercial airports would go from 52.68 under the current distribution to 55 percent under your recommendation. Are you familiar with that?

    Mr. MERLIS. Yes.

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    Mr. DUNCAN. Are you saying something a little different today than we heard in here just a few days ago?

    Mr. MERLIS. I think our proposal takes the primary commercial airports, which are the 32 largest, and does away with entitlements for them. That is a big chunk of change. By taking that $600 million or so and using it for safety and capacity projects on a priority basis, you will put the money where it will have results.

    I do not think you need to change the whole pot, if you fund it at a good level. What you need to do though is ensure that, other than the entitlements which you, just take away from the largest airports, and then for the discretionary money put the money where it will deliver the biggest bang for the buck. That is not the case today with all the pigeonholes that exist in the AIP program.

    So I think it would inure to the benefit of the large airports. Some airport might get nothing for 2 or 3 or 4 years, but when it comes along with a $300 million project with a significant benefit to the national system, it might get a very large amount of money out of the discretionary fund.

    Mr. DUNCAN. What you would be doing is changing the formula a little bit but the results would be basically the same, or very close to it?

    Mr. MERLIS. On a dollars and cents basis, yes. But where the money actually gets invested, in Midway or St. Louis, or whatever airport has projects, I think that is where you would see the big change. The largest change would be at the large airports, which are the ones which do not have the need for entitlement funds, but do have the needs for large amounts of money for these major safety and capacity projects.
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    Mr. DUNCAN. Captain Babbitt, let me ask you this. You know that some people have said that because the number of passengers flying commercially is going to go way up over the next 10 years, that the number of crashes is going to go way up. We have even seen some disaster-type predictions of one crash a week by the year 2015 or something like that.

    Do you believe that? Or do you believe that those are just off the wall, publicity seeking, hysterical-type predictions that will not come true?

    And along with that, the NTSB is sometimes at odds with the FAA in some of their recommendations. Is there one thing or are there two or three really big things that you and ALPA would like to see implemented or included maybe in this legislation, that the FAA is not doing now, that you think they should be?

    Mr. BABBITT. Yes, sir. Let me start first with the projections. Regardless of the source, I think everyone here would acknowledge the statistics that I think were compiled recently by Boeing, showed that if the rate of accidents, the actual percentage per 100,000 operations, was unchanged with the increased forecast in traffic, which is now on an international basis some 5.8 percent per year by the FAA's numbers. If that is projected out, yes, sir, you will in fact have the loss of one hull a week by the year 2015.

    That is clearly unacceptable. The good news is that I believe that the rate is continuing to reduce. We have had some bumps periodically but it is an incredibly strong trend to the positive.

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    Is there one or two fundamental things that would be more helpful than others? I think if you look at the cause of a number of the accidents, you are going to find an unacceptable percentage of the aircraft accidents of today are what is known as controlled flight into terrain. There are now technologies available. We have, as an association, appealed to the FAA to bring about regulatory reform that would require new technology in aircraft.

    I think you are familiar that we have ground proximity warning systems. But today there is available technology with enhanced ground proximity warning systems that give any pilot a much better, or much enhanced positional awareness, situational awareness, of the terrain about them. It is very sophisticated. And equally good news, it is not terribly expensive.

    There is other things that could be done at the airports themselves. We have pushed, I mentioned in my testimony here, the fact that we still have airports, large major airports, that do not have electronic or visual guidance on the vertical plane to the airport. That is unconscionable.

    Chicago O'Hare, one of the largest, busiest airports in the entire world, has no visual approach slope indication to any of its runways. They do have, in fact, electronic but there are certainly occasions when the electronic operations fail. Redundancy is fundamental in aviation safety. Absolutely. It is just unthinkable that we could have that situation.

    The safety areas that are provided off the end of runways, there is a great variance sometimes between what is on the chart where a pilot looks and he says well, we are at maximum gross weight but I know that there is a 500 foot overrun off the end of this runway if I blew a tire or something, or lost a brake or something along those lines. Only to find out that there is, in fact, 500 feet out there but it has been cluttered or unattended, perhaps even rutted, canals. Too many incidents of that overrun area not being truly an effective overrun.
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    These are things, and I will go back to a phrase that was used by Mr. Merlis, priority. If we take the things, and we certainly do that in a cockpit environment. If you are having a number of emergencies and the confluence of them is all coming together, someone who is going to deal with these properly is going to take the most important, the most life-threatening first. I would suggest that the FAA could make great strides by using the expertise that is available in this industry, and I think we have made great strides in having the Congress, the industry itself, and labor working together to prioritize, to say we can accomplish something in a very short time, for very little money, that is going to have a great deal of effect on safety.

    I think that would be the best phrase that I could use, would be to take a hard look at prioritizing what we could do quickly, effectively for the least amount of money and work down the decision tree.

    Mr. DUNCAN. I have gone far longer than I should have, and I apologize.

    Mr. Merlis, what about the ground proximity systems that Captain Babbitt describes as being of very low cost?

    Mr. MERLIS. We agree and the ATA member carriers have volunteered to install them, so people will be better off—our crews, our employees, our cabin crews, and our passengers—as these are installed because we recognize that it is the highest priority technology, or the technology which can solve the highest priority cause of accident.
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    Mr. DUNCAN. When will that installation be completed?

    Mr. MERLIS. Some of them have already started. I am not clear on the completion date. I believe it may be 3 to 4 years out. Part of the issue is manufacturer production. They have got to ramp up enough when you suddenly get 4,000 airplanes that are going to be online.

    Second is installation, because it is done during a particular part of the maintenance cycle. But the ATA member carriers are assiduously pursuing it.

    Mr. DUNCAN. Thank you very much. Mr. Lipinski?

    Mr. LIPINSKI. Thank you, Mr. Chairman.

    Captain Babbitt, I really appreciate getting that information about O'Hare. I fly out of there once a week and fly back in once a week, and I really appreciate having that information. My journey will be much more comfortable now, I am sure.


    Mr. LIPINSKI. Mr. Poole, the air traffic control unit, corporation, whatever you want to call it——

    Mr. POOLE. Provider.
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    Mr. LIPINSKI. The concern I have about that is my home town airline, United Airline, my very good friend Bob Crandall's American Airline, maybe a few other large corporations such as that, what safeguards can we put in place that they would not wind up dominating this new entity that is going to take care of our air traffic control system? And I mean dominated?

    Mr. POOLE. I understand, and it is a real concern to many of the smaller airlines, as well as to the general aviation community. I have had extensive discussions, including with Southwest Airlines, on this.

    There are two different approaches that have been taken in other countries. One, which is the case I believe in Canada, is to require that none of the members of the board have any direct pecuniary connection with any aspect of commercial aviation or of aviation—period. They may have aviation backgrounds but not any current position, either on the board or as an employee, of any aviation company, but you would get that input through something like a management advisory council instead.

    So therefore, the board are public spirited citizens with good business knowledge but they do not have any direct interest in any part of the aviation industry. So that is one approach.

    Mr. LIPINSKI. Who would appoint these people?

    Mr. POOLE. Certainly initially, it would be the president and Congress, something of that sort. There is a question of later on. The National Civil Aviation Review Commission recommended that that be the permanent structure.
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    We would propose, rather, that the board subsequently be self-perpetuating, more like a business board. But that is a detail.

    Mr. LIPINSKI. I do not know how much of a detail it is.

    Mr. POOLE. It is an important detail.

    Mr. LIPINSKI. Particularly when my good friend, Ed, is sitting next to you, shaking his head in agreement with you, and he does not exactly have the most objective opinion here today.

    Mr. POOLE. The other model is to structure the board in such a way that you very carefully attempt to represent all the segments of aviation, all the users, including employees, such that the big airlines cannot dominate, cannot have a controlling majority to make all of the decisions favorable to them.

    I think that is another approach. That is the approach that Switzerland is taking. That is the approach that—I am trying to think, there are a couple of other countries that have used that approach. So that is an attempt to balance in the charter, by structuring the board so that all of the user groups are represented, but in a way that prevents the obvious potential danger of simply the large airlines being able to call all the shots and the others are only there for window dressing.

    I think that is possible to do. Not easy, but possible to do.
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    Mr. LIPINSKI. Because I think that is one of the biggest problems going the direction that you are advocating us go, is that the big airlines, as I say, not only having great influence but actually dominating the whole situation.

    Mr. Pittard, you made mention of the fact that the Europeans would retaliate if we passed the foreign repair station bill. How do you mean retaliate there?

    Mr. PITTARD. Just like if we require 145 certification for agencies over there, they would then require their certification for their agencies over here. That can not work in necessarily our failure. Ed may be able to detail that a little better than I.

    Mr. LIPINSKI. One of you tell me why would that not necessarily work in our favor? Mr. Bolen, you had mentioned that if we passed this bill we could lose jobs, also. I would like you to elaborate on that.

    Mr. BOLEN. It all relates back to the retaliation, on how they perceive and move forward on that. Just as an example, one of our member companies is Flight Safety International, which trains pilots internationally. They have simulators and are the world's largest flight training program.

    There is currently an effort being made by the Joint Aviation Authorities to change the training requirements in Europe to require that European pilots be trained at companies that are 51 percent owned by Europeans and have a principal place of business in the country where the airline exists.
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    The gentleman from Flight Safety International was talking to the people about that and they said sure, it may be a little protectionist, it may restrict trade, but you guys do it all the time over there, too, look at H.R. 145. They named the bill by name.

    So it is something that is clearly on their minds and in the forefront of their thinking, and I do not think it is something that they are going to be passive about.

    Mr. LIPINSKI. In light of the fact, though, that American owned passenger carriers make up 50 percent of the entire world commercial aviation market, no matter how you judge it, how much capital they have, how many planes they have, how much personnel they have, no matter how you judge it is a minimum, an absolute minimum of 50 percent. There are some people who say it goes up to 65 or 70 percent, but I am just going to go with the minimum.

    I do not see how anybody other than the United States of America winds up winning if we get into protectionism, since we have 50 percent of all of the commercial aviation in the world if we are going to have that 50 percent done in this country and there is only 50 percent left for the rest of the world to do.

    So I do not really see how it, in the long run or the short run for that matter, costs us jobs. Mr. Pittard or Mr. Bolen, if you want to respond to that, I would be happy to listen to you.

    Mr. BOLEN. As I was mentioning earlier on the flight training, it is not just a direct retaliation on that specific issue. It is also in other areas, as well. We are currently facing a number of issues in front of the Joint Aviation Authorities where they are trying to do things which we believe are blatantly trade related.
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    For example, we are currently fighting with them over an issue called extended-range twin-engine operations or ETOPS. They are trying to promote a rule on general aviation aircraft that would prevent twin engine aircraft from flying the routes across the Atlantic that we have been flying without incident for 32 years. They are now saying that we can no longer take those routes and that we have to fly longer, more circuitous routes that stay within two hours of an airport at all time.

    It is interesting that the only business aircraft that has three engines is made by a French company, Dassault, and they are one of the leading promoters of that.

    Now obviously, if that restriction is allowed to stand, there is going to be a tremendous competitive advantage that is now thrown to the European manufacturer in the purchase of business aircraft needed to cross the Atlantic and for extended range operations.

    So I think that the point that we are trying to make is it is not just a retaliation on this issue. It is upsetting what we have been working very hard on for a number of years, which is trying to harmonize aviation rules and move forward in a more international atmosphere of cooperation. Setting up protectionism may benefit us in a certain area but it may not benefit us in the long run. I think you have to look at all of that put together.

    Mr. LIPINSKI. I think that is exactly the point, though. I think it benefits us in all areas because once again I get back to the sheer numbers. If we have 50 percent of everything that is going on in aviation, if they want to go into protectionism, if they want to go into retaliation, we can do exactly the same thing. We still wind up with 50 percent of everything in aviation that is going on in the world. I do not think anybody else can come close to us.
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    Consequently, I do not believe that they go out and try to do anything against us because they lose in the short run and the long run.

    Now what you are talking about, in regards to three engines or two engines, we can just turn that around and do the same thing in this country and give the advantage to our planes in this country. As I say, once again, when you have 50 percent of everything, I think people are going to be willing to sit down and reason with you.

    Let me move on to Mr. Wytkind over here, because I have a question for him, too. I am a great supporter of organized labor, always have been, always will be. But I really have to have greater justification from organized labor in regards to this particular bill because I have made some investigations myself. I have talked to a number of people.

    Right now I stand in the position where I believe that we, in this country, have more business from international carriers than international maintenance stations have from American carriers. I need from you evidence that that is not the case, that we are moving in the direction of losing jobs because of it.

    So far my evaluation and what I have seen is not occurring. And I have to say that I have not been to the worst maintenance stations in other parts of the world. Unfortunately, the ones that I, from our perspective—and when I say ours I am talking about organized labor—the ones I have been to they are very good places. But I have been to places in Europe.

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    I mean, the standards that they have in regards to safety really have been excellent standards. But I want as much for the American worker as possible, but you do have justify to me that it is advantageous to the American worker and to safety to move this bill.

    Mr. WYTKIND. Let me first say, Mr. Lipinski, you are right, you have been one of the strongest supporters of organized labor and I have to say we appreciate it. Since you have been in this Congress you have been there for working people your entire career.

    On this issue, there has been a lot of discussion, both on this panel and over the last year or so, about what the real jobs issues are. The reality is that this legislation does not attempt to impose standards that could not be fulfilled in places in Europe that you have been to and that these gentleman are talking about.

    The issues about safety with regard to FAR 145 have to do with facilities that are in business, and openly admit they are in business, to lure American business away from the United States. Places like Tijuana, Coopesa in Costa Rica.

    Those are the facilities that the GAO should have gone to. Those are the facilities that I welcome people to go take a look at, because those are the facilities that this legislation would affect. The reason they would be affected is because all this legislation says is you have to operate under FAA standards to get our FAA seal of approval.

    I think this legislation is very simple. If you do not want to operate under FAA standards, then do not, but do not expect to be able to display the FAA seal—which if you go to one of those facilities like Coopesa, it is very prominently displayed. Why is that? Because the FAA is the highest seal of approval worldwide on safety.
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    As far as the jobs issues are concerned, the reality again is that those European carriers, we do not see British Airways, Lufthansa and others bringing the heavy overhaul work to the United States. The maintenance being done in this marketplace is being done because of what you pointed out. You do not ignore the marketplace that represents about half of the world marketplace. You have got to do business here, and that includes some maintenance needs.

    They are not doing the maintenance checks from the European carriers that put thousands and thousands of man-hours on the floor to overhaul a 747 on its scheduled maintenance. They are doing other kinds of maintenance.

    What we see, for example in Coopesa, is there have been a few small carriers that have actually gone to do their work there and they have openly admitted on camera that they are doing it there because they can cut their labor costs by two-thirds or more.

    So yes, I would be happy and hope I can provide you some more detailed information about what the real jobs picture is, but the reality again is that this legislation does not require the European community to make drastic changes in the way it does business because they have very high standards that they abide by.

    What it does do, though, is tell people if you want the FAA seal of approval, then do business the way FAA standards require you to. That is all this legislation does.

    Mr. LIPINSKI. Thank you. I want to say to the entire panel, I appreciate very much all of your input. You are all very knowledgeable individuals in this area, otherwise obviously you would not be here, but you are also very articulate and you make your points extremely well.
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    Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Mr. Lipinski, and I second that. This has been a very helpful panel and very helpful testimony. Thank you very much for being with us.

    We will call up the second panel at this time. As they are moving forward to the table, I will introduce the second panel.

    We have Betty Ann Kane who is a Washington lobbyist for the National Organization to Insure a Sound-controlled Environment; Pete West, who is Senior Vice President for Government and Public Affairs of the National Business Aviation Association; David L. Davidson, who is Executive Vice President of Barge, Waggoner, Sumner and Cannon on behalf of the American Consulting Engineers Council; Mr. Paul Hudson, who is with the Aviation Consumer Action Project; and Mr. Jim Drinkard, who is Vice President of HNTB on behalf of the American Road and Transportation Builders Association.

    As I have always stated, we will proceed in the order the witnesses are listed on the call of the hearing. That means that Ms. Kane, we will start with you, and you may begin your testimony, please.

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    Ms. KANE. Thank you very much, Mr. Chairman and for the record, my name is Betty Ann Kane. I am the Washington lobbyist for an organization of local governments, which is called the National Organization to Insure a Sound-controlled Environment and our acronym is NOISE. Our members come from communities, cities and counties large and small across the country that are impacted by airport noise.

    I will put my full statement in the record and I will summarize for you.

    NOISE is going to focus obviously on the noise aspects of the reauthorization of the FAA AIP program. We want to bring one overriding message today, and that is that airport and aviation noise continue to be a significant environmental problem that needs to be addressed as we go forward with a new AIP program. It needs to be addressed both for the environmental health of our communities, as well as the potential restraint that unresolved noise conditions have and will have in the future on airport and air transportation capacity.

    There has been some impression created that because of the very good work that the FAA has done to keep everyone on track and on schedule in implementing the 1990 Airport Noise Capacity Act which requires the phase out of Stage Two and the transition to complete Stage Three fleet mix by the year 2000 that the noise problem will therefore disappear.

    The Stage Three aircraft are certainly making a difference and contours at many airports are shrinking. But as the number of flights increases, those contours will expand again as new airports go into the business of more commercial aviation, particularly with the growth of cargo operations which are at night which therefore bring noise over areas and at times when there has not been noise before. Noise continues to be a significant problem.
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    This is not just our view. To quote from the National Civil Aviation Review Commission's report which, in its executive summary, in speaking of the inadequacy of the level of funding that the FAA believed was necessary for the AIP program, it says that they did not agree that at that level of funding the FAA has not provided single year AIP grants for all high priority capacity projects and noise mitigation projects that were ready for construction.

    It points out that while there have been tremendous achievements in noise mitigation near airports, millions of people living in areas near airports still experience noise levels that are incompatible with residential usage, and the noise funding set aside they point out was cut in 1996. And if a higher level of funding were achieved, noise mitigation through AIP could achieve much more environmental benefit and timely results.

    We have 10 brief points that I want to summarize for the reauthorization of the AIP. Number one, it should be reauthorized, and it should be reauthorized for a time period that is long enough to allow for planning and fulfillment of commitments. Noise mitigation projects and other projects take some time. There has to be some long-term and reliable sense of what the program is going to be.

    A statutory set aside of discretionary funds for noise mitigation projects should be preserved. A change that we would suggest, if there is any way possible, a prohibition on the kind of artificial caps on the amount of money available for noise that we saw, for example, in last year's appropriation act. We know you do not control the appropriators.

    But while the formula which would have provided a certain percentage was in place in the authorizing legislation, there was a $200 million cap placed on the actual appropriation. Just the airport noise mitigation program at San Francisco Airport is $130 million. So that gives you an idea of how little $200 million does.
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    We also think it is very short-sighted of airport operators to oppose set asides, as they tried last time, for noise or to attempt to divert noise funds for other purposes because the lack of availability of Federal funding does not relieve an airport operator of promises and commitments that it has made to a community. Without the Federal funds they must dip into their other funds.

    Number four, we believe that Congress should require that any projects funded with PFC charges must conform to the existing Part 150 plans. Currently, PFCs may be used for noise compatibility measures whether or not a program for those measures has been approved under the Part 150 program. Our concern is that this cuts out the public involvement. It circumvents the effort that has gone into developing with local communities Part 150 noise mitigation plans.

    We also believe that there should be an amendment to the legislation which would require that the FAA either hold a public hearing in the affected community before approving a PFC application or, at minimum, to require a certification from the operator that adequate notice and consultation with the local surrounding governments and communities has occurred before a PFC application has occurred. Currently, the only public notice is the publication in the Federal Register and that is after the application has been filed.

    We believe that a portion of any increase in PFC levels should be designated for noise prevention and mitigation. We do not have a position on increasing the PFCs, but we believe it is not responsible or possible to provide for air system capacity without making adequate provision for reducing aircraft noise.
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    The Office of Noise Ombudsman should be supported and should be strengthened. We think a significant commitment is needed to research, to develop technologically and economically feasible, quieter aircraft. A redefinition of DNL and the development and use of additional noise metrics in airport planning and mitigation is necessary. Increased research into the health effects of aviation noise.

    And finally require that airports make an equal commitment to sticking to their masterplans and establish a high hurdle for approving runway and other masterplan changes that have a noise impact on surrounding land use. I will end with that.

    Increasingly, local governments are being asked to turn to land use planning as the way to mitigate airport noise. FAA is going to undertake a revision and a re-examination of its land use guidance. NOISE has been asked to be involved with them on that.

    Often you hear well, why did those people move in close to the airport? Why did they not use land use planning and prevent it?

    We agree that land use planning is a very important tool and a very important part of mitigating and preventing the problems association with airport noise and therefore providing for airport expansion in the future. But all too often our members in particular have experienced situations, they work with the airport, they look at the airport's plans, they do their land use planning, they put in place zoning, buffer zones, et cetera, only to find five, 10 years later the airport coming back, changing its masterplan and now wanting new runways, sending noise over areas that had not been designated for that use before.
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    So we think if the land use has got to be planned ahead, there has got to be much more long-range planning and much more commitment on the part of the air use, also.

    Thank you very much.

    Mr. DUNCAN. Thank you, Ms. Kane. Mr. West?

    Mr. WEST. Thank you, Chairman Duncan, Mr. Lipinski, Mr. Pease. It is a real pleasure to be here on behalf of the 5,200 member companies of the National Business Aviation Association. Also, the professional staff, and the many elements of the business aviation community out there that are not necessarily associated with NBAA but who's interests we represent in general.

    It is especially important that we all be here to talk about FAA/AIP reauthorization, especially in the context of the National Civil Aviation Review Commission report.

    Personally, I think this is a real honor and a real pleasure to be before you, being the messenger for NBAA.

    Since we are on panel number two, I will be like Avis and try harder to be brief and concise. I will summarize my testimony, but first I am going to describe the NBAA membership, so that there is a clear understanding of who we are.

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    We are companies that own and operate general aviation aircraft to aid the conduct of business activity, or that are involved in business aviation directly or indirectly. We are the world's most active users of general aviation for non-commercial business transportation.

    Our companies purchase collectively over $11 billion worth of airline tickets each year. Our members rely on a safe and efficient system to serve its customers, their customers, and expand their markets.

    These companies use aviation to facilitate the ebb and flow of commerce to thousands of communities throughout the country and globally. These companies contribute in a significant way to the economic well-being of these communities in the country and employ millions of workers.

    Business aviation is an invaluable tool that creates good paying jobs and sustains economic growth, and compliments, very effectively, the scheduled air carrier system. We view the entire aviation community as respected partners, in particular the commercial air carriers. I will raise a point later that will emphasize that even more. The fuel taxes that our community pays is not insignificant and will not be insignificant in the future.

    I like to say that NBAA represents the business community's use of the aviation system in its entirety. Clearly, business aviation helps companies succeed by providing access to economic opportunity in communities throughout the Nation and the world. An example is Clayton Homes, which is one of our member companies in Knoxville and I highlight for obvious reasons. There are many of them in your districts, too, Mr. Lipinski and Mr. Pease.

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    This is a document we produced last year, called the ''Real World of Business Aviation''. I personally handed one to you Mr. Chairman and, I think, to you as well, Mr. Lipinski, in the past. I brought some copies and will leave them for the subcommittee to look at. It really details what business aviation and these companies, small, medium or large, are all about.

    This map that I show you is not the USA Today color weather map. It is the ''Real World of Business Aviation'' map that presents the number of airports in the country. There are 5,500 airports in the country that can be served by general aviation (including business aviation). That is 10 times the number of airports that have some form of commercial service and 100 times the number of airports that have frequent scheduled service, air carrier service. So it is a very significant factor in the subcommittee's considerations. Access to these airports is absolutely essential.

    Airports facilitate commerce and face-to-face communication between people. That is good for the economy and good for quality of life. Airports offer great value to direct users and help communities, particularly those in rural areas, attract and retain businesses and, thus, the jobs and the economic activity associated with those businesses.

    Thus we urge at least $2 billion a year for AIP. I am quite frankly concerned with what we heard about happening yesterday, in terms of taking some dollars away from AIP to pay for other things. I think Congress made a good decision when they dedicated the funds for fiscal year 1998 to the Airport Improvement Program and the integrity of your decision should be retained.

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    From our perspective, Federal dollars are the only viable means for funding development of smaller, general aviation airports that do not have access to PFCs or other revenues available to larger airports. As Ed Bolen said on the previous panel, there is a lot of bang for the buck when it comes to Federal investment in smaller general aviation airports.

    I would also like to stress at this point the importance of avoiding the closure of public airports, as has been attempted in certain locations recently. The integrity of the Federal grant guarantee, the assurances element of our system, must be preserved.

    On to modernization. We must use this opportunity to proceed with ATC modernization and focus on what we call the ''invisible infrastructure''. The airports are ''physical'', the ATC system is primarily ''invisible''. Otherwise, the country will not be able to sustain its leadership and growth in the world economy.

    Technology is available to accomplish this. GPS will provide precise definition of location. Datalink will provide a wealth of information in the cockpit. Fast and highly reliable computers will ensure safe and efficient flight management.

    The challenge is to use advances in air navigation, communications and computer technology to satisfy our nation's travel needs and to set the pace for world leadership in air traffic management and control.

    ''Free Flight'' should be our ultimate goal. ''Free Flight'' will increase the efficiency of air space management and safety and NBAA is actively working with the FAA Modernization Task Force and the RTCA in focusing on ''Free Flight''.
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    The aviation system must evolve from ground-based navigation aids to satellite-based global positioning systems. The Wide Area Augmentation System and the Local Area Augmentation System are vital to enhance accuracy, integrity, and continuity of the GPS signal. NBAA also recommends that Loran C serve as a backup at least until the year 2005. Once again, I will mention Datalink because that will go a long way to improving interaction between pilots and controllers as well as other decision support tools that will increase situational awareness to enhance safety and capacity.

    The entire general aviation community is focused on this modernization and on the safety issue. Jack Olcott, the President of NBAA, who could not be here today because he is out at the FAA General Aviation Forecast Conference, another sign of the new partnership that is evolving between the FAA and industry. We are out there talking about general aviation issues with the FAA people who are directly involved in our activities.

    He is the chairman of the General Aviation Action Plan Coalition this year. That coalition is trying very hard to develop working groups to develop consensus recommendations with the FAA, especially in the areas of safety and modernization safety. We are presenting those to Jane Garvey, who has actually been to a couple of our meetings, which we have once a month.

    Moving on, it is hard to believe that the Y2K issue is an issue at all, especially in light of the high tech, sophisticated computer industry in this country and worldwide. Nevertheless, it is an issue, and thanks to this subcommittee, and others in Congress, as well as folks in the administration and in the industry, we are focused on this mission-critical issue. We realize the responsibility we have to ensure full 100 percent compliance before the first day of the new millennium.
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    We encourage this subcommittee, and you Mr. Chairman especially, to continue your diligence in this area.

    Next, the report of the National Civil Aviation Review Commission. Obviously, we appreciate the work of that commission. They had a significant task and a short period of time to do it. We especially appreciate their recognition of the important and unique role of general aviation, including business aviation.

    We acknowledge their support for the fuel tax mechanism for general aviation and appreciate the very Honorable Norm Mineta for his statement last week before this subcommittee, especially when he said we wanted to make sure there would be no increases in the tax.

    We also appreciate the call for the continuation of a General Fund contribution.

    NBAA does have concerns with the concept of user fees that are once again raised through the NCARC proposal, as well as the President's new budget proposal for the next 5 years. We also have concerns and questions about the performance based organization.

    I do think it is going to be interesting to see what happens with the cost accounting system. We have met with some of the people who are working on that and I agree with Ed Merlis, who was on the earlier panel talking about how important it is to get a grip on what things cost. Before we can really go any further, we have to understand over at the FAA what things cost and how those costs are driven.
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    I think we are all going to be very enlightened and we might even be surprised by what that cost accounting system shows.

    Finally, I want to comment on the need for entire aviation community representation in these debates and dialogue, especially with the Congressionally mandated Management Advisory Council. What I enlightened you about, in terms of the business aviation community at the start of my remarks, should suggest the importance of having the business aviation community represented on that MAC.

    If we truly represent the business community's use of the aviation system, and you think about how important the economy and the business community are, in general and specifically with regard to the aviation system, it is absolutely essential that our perspective be brought to bear on the future discussions about the system. The person to do that is NBAA President, Jack Olcott.

    I want to thank you all for letting me make my remarks and represent NBAA, and I look forward to receiving your questions so that I can respond to them if I can.

    Mr. DUNCAN. Thank you very much. Mr. Davidson?

    Mr. DAVIDSON. Thank you, Chairman Duncan.

    As introduction, I am Executive Vice President of Barge, Waggoner, Sumner & Cannon, a Nashville, Tennessee firm engaged in the designing and planning of airport facilities throughout the southeast. Today I represent the American Consulting Engineers Council, the nation's largest organization of engineers in private practice engaged in consulting engineer.
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    There are three critical areas that this committee should consider as legislation is prepared to reauthorize the Airport Improvement Program. They are funding for the future, quality through competition, and accelerated project delivery. I have elaborated on each of these issues in my full statement and I will try to be brief in my remarks today.

    From the perspective of planners and designers, it is critically important for Congress to recognize that obtaining adequate and, equally important, predictable funding for the AIP program is critically important when planning, design and construction projects that take, on average, 10 years to complete.

    ACEC recommends that Congress fund API at no less than $2 billion per year. An API program funded at no less than $2 billion per year, when combined with the other sources of funding available, is a solid starting point for addressing the critical infrastructure needs of our nation's airports.

    In addition, ACEC also strongly urges that the Congress should take all the transportation trust funds off budget to ensure that those funds are spent to address the critical needs for which they were collected.

    I would like to now focus on an important concern the consulting engineers face relative to the expenditures of passenger facilities charges or PFC funds. Before I do, let me describe a process by which engineers are procured for contracts, namely the qualification base selection, or QBS process.

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    Because the details of an engineer's work is not known before he is selected, a bid price for the services is inappropriate as there is no basis to which to submit a bid or even compare a bid. Therefore, it is most effective to select a firm for its qualifications, expertise and past experience. Then, with the owner, outline a detailed scope of services the engineer will perform and negotiate a fair and reasonable price.

    If an owner cannot agree upon a price acceptable to both the engineering firm and the owner, the owner moves to the second most qualified firm and the process begins again. The owner can continue this process until he is satisfied with the services he is to receive and the price he is to pay.

    The QBS process I have just described is nothing new. It was enacted by Congress nearly 30 years ago as Public Law 92-582, commonly referred to as the Brooks Architect-Engineer Law. Every Federal agency must use the QBS process when selecting engineers and architects as well as Airport Improvement Program grantees. As you can gather, due to the proven benefits of this process, lower overall project costs, fewer delays and higher quality of work have resulted.

    The PFC program does not require the use of QBS process when PFC funds are used. ACEC urges the inclusion of statutory language requiring that the use of QBS when architectural engineering services are procured.

    Just as required for grantees of other public trust funds held under the supervision approval of Federal executive agencies, the FAA has the responsibility to assure the public usage of funds consistent with all other Federal programs. The interest and safety of the public is at safe.
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    The final issue we would like to address is accelerated project delivery. As I mentioned previously, on average it takes 10 years to plan, design, construct a major transportation project. We believe this time can be significantly reduced.

    Currently, there are delays in issuing permits after environmental documents have been certified. There are unnecessary duplication and burdensome regulations that impact the day to day work. One example of a delayed project worth mentioning is a runway project in Wisconsin. The airport director was so frustrated with the paperwork that he kept a note on a board in his office that said runway 3/21 will not be built until the weight of the paperwork equals the weight of the concrete.

    In this particular example, the record of decision was issued over 3 years from the start of the project, and cost approximately $1 million. Mr. Chairman, I am told by the people involved in this project that it should have cost less than $300,000 and taken approximately 18 months to complete this phase of the project.

    The problem is that each Federal and State agency with jurisdictions over a project requires its own separate review, forcing separate reviews of separate regulations and requiring planners to answer separate requests for additional information. Also, each agency issues permit approval according to their schedules.

    ACEC recommends that Congress include the Federal Aviation Administration in the coordinated environmental review process that is currently proposed in both H.R. 2400, BESTEA, and S.1173, ISTEA II. Both ISTEA reauthorization bills proposed to establish a coordinated environmental review process within the U.S. Department of Transportation where all review, analysis and permits are performed concurrently and cooperatively with a mutually agreed upon schedule of both Federal and State agencies with jurisdiction over the project.
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    Please understand, our proposal is not intended to change the goals set forth in the National Environmental Policy Act or other related environmental laws. Our goal is to address the process issues that end up adding substantial time and cost to transportation projects.

    Mr. Chairman, this concludes my testimony. I will be glad to answer questions and we appreciate this opportunity to present our views.

    Mr. DUNCAN. Thank you very much, Mr. Davidson. Mr. Hudson?

    Mr. HUDSON. Thank you, Mr. Chairman. Good afternoon, Mr. Chairman, and subcommittee members.

    My name is Paul Hudson. I am Executive Director of the Aviation Consumer Action Project or ACAP, which advocates for the interest of the flying public on issues of safety, security, cost and convenience. Our organization was founded in 1971 by Ralph Nader and, as such, is the oldest national aviation consumer organization.

    Aviation consumers today are faced with increased delays, particularly at major airports. They are faced with overcrowded airliners and, particularly in the last year, with large increases in ticket prices. Last year ticket prices increased by 15 to 20 percent while an excise tax was reimposed, as well as of course the passenger facility charge of $3 per ticket at many airports.

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    Most analysts expect ticket prices to go up another 15 percent in 1998. This is at a time when the general inflation rate is 1.5 percent and most airline costs are down. The airline passenger, in essence, is being squeezed, both financially and literally, as never before by an industry that is restricting supply and using its pricing power to reap record profits, and in some cases price gouge passengers.

    What funds are available through this authorization process and how they are used will play a key role in determining whether the current squeeze on passengers continues or is relieved over the next several years.

    With regard to safety and security, there is a vital need for increased funding to the nation's airports to meet standards mandated in law. In the security area, these standards were put in law by the Aviation Security Improvement Act of 1990. They were, in turn, recommended by two presidential commissions but as yet they have never been implemented.

    For example, there is a need for 1,000 bomb detection machines at a cost of approximately $1 billion, to implement the next stage of security improvement. So far last year, there was appropriations for only 50 machines.

    The nation's major airports are becoming overcrowded. However, at the same time that many medium and small airports are seeing reduced travel. Meanwhile, aircraft manufacturers are now introducing regional jets and increasing the use of wide body jets, which carry more passengers per plane.

    Accordingly, the crisis of overcrowding and higher fares is solvable through a combination of increasing the use of secondary airports near major cities, plus increased use of smaller and medium sized airports. We recommend that the passenger facility charge, the cap on it not be increased, and it be reauthorized for 3 years.
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    Secondly, that priority be given to funding increases in capacity and legally mandated security and safety improvements.

    Thirdly, that an audit provision be included to automatically reduce the allowable ticket tax and PFC tax, to the extent that these taxes are misspent.

    We oppose the recommendation of the National Civil Aviation Review Commission to fund industry capital improvements on an automatic basis while relegating safety and security improvements to remain within the appropriation process.

    As part of the reauthorization process, we would also suggest the committee consider shifting responsibility for air traffic control modernization from FAA to NASA. FAA has had at least three opportunities to modernize the system and has failed miserably each time, and we think it is time for a change there without giving them a fourth try.

    Secondly, capping the airline ticket prices at 50 cents per mile without DOT approval. We view this as a stop-gap measure to curb the anti-competitive practices that are driving ticket prices through the roof.

    Thirdly, any exemptions of FAA safety rules without strict Congressional and public disclosures. One of the most frustrating problems in the safety area is not only do we have weak rules that are spottily enforced in many cases, but the FAA is now granting approximately 300 exemptions or waivers of its safety rules per year, and many of these are done in private, without disclosure.
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    In conclusion, funding of airport and airway improvements does not require higher taxes and fees on aviation consumers at this time. A balanced approach to airport capacity expansion, coupled with an emphasis on funding safety and security improvements, and a curbing of aviation industry anti-competitive practices, should be the policy and strategy adopted by this subcommittee and written into all appropriate authorizing legislation.

    I have submitted, in more detail, written testimony and I would be glad to answer questions on any of these topics.

    Mr. DUNCAN. Thank you very much, Mr. Hudson. Mr. Drinkard?

    Mr. DRINKARD. Good afternoon, Mr. Chairman and members of the subcommittee. On behalf of the American Road and Transportation Builders Association, I want to thank you for the opportunity to testify before you today about the need for reauthorization of the Airport Improvement Program. By way of background, I am a practicing professional civil engineer who has been involved in the design of airports for over 20 years.

    The American Road and Transportation Builders Association is the only national association devoted solely to the planning, construction and safe operation of transportation facilities of all types. Our nationwide membership is composed of contractors, engineers and planners, equipment manufacturers, material suppliers, financial institutions, educators and transportation officials from Federal, State and local Government.

    As the individuals responsible for the planning, development and maintenance of all modes of transportation, ARTBA members know the national air transportation system is a critical component of interstate travel, commerce, and the national defense generating substantial benefits to the public.
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    The Airport Improvement Program is integral to successfully achieving a safe and efficient aviation system. Consequently, ARTBA recommends that the Airport Improvement Program be authorized and appropriated at a minimum of $2 billion annually. ARTBA also supports a secure and stable financing mechanism for the Federal Airport and Airway Trust Fund.

    In addition, like all other Federal user fee supported transportation program, we believe the Airport and Airway Trust Fund should be removed from the unified Federal budget or, at a minimum, be afforded special budgetary treatment that recognizes its unique status and insures aviation revenues will be used exclusively for aviation improvements.

    ARTBA recognizes maintaining the current economic growth that has allowed this Congress to operate in a balanced budget environment in decades is foremost in the minds of all Federal policy makers. ARTBA will soon complete a comprehensive new empirical analysis of the economic importance of our nation's transportation infrastructure. The preliminary findings of this study are completed.

    The study found that for every $1 billion invested in airport construction, over $2 billion is generated in output and revenues to firms throughout the economy. This is a return of over 100 percent generated by airport infrastructure investment.

    Furthermore, every $1 billion invested in airport construction generates over 18,000 direct and indirect jobs. This includes design service jobs, construction site jobs, office and managerial jobs within the transportation construction industry, and all of the jobs generated throughout the economy by contractor purchases of materials and supplies. Almost half of the jobs created by airport infrastructure investment are in the transportation construction industry.
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    The study results clearly demonstrate the economic multiplier effect of investment in airports. In addition to generating significant economic benefits, transportation infrastructure is also a wise investment that will pay dividends for generations to come. Transportation infrastructure is the nation's most durable and longest lived productive asset, according to recent data from the U.S. Department of Commerce on tangible assets of the United States.

    The average transportation infrastructure facility will last more than 67 years before having to be completely torn up and replaced. Few other productive assets last as long. In fact, only residential structures, homes and apartment buildings, last as long as airports and other transportation facilities.

    What this means is that a dollar invested in our nation's airport infrastructure will pay benefits to the economy significantly longer than any other form of productive asset, once again demonstrating the significant bang for the buck of transportation investment.

    Despite the overwhelming benefits of airport and airway investment, the budget proposal submitted to Congress February 2nd by the Clinton Administration falls well short of investing in necessary capital improvements for our aviation system. Total outlays for aviation programs in the president's budget for fiscal year 1999 would rise from $8.97 billion in fiscal year 1998 to $9.2 billion in fiscal year 1999, 1.3 percent more than would be needed just to accommodate inflation. By fiscal year 2003, outlays would grow to $11.4 billion, a real increase of 14.3 percent over the projected rate of inflation.
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    However, these additional expenditures would primarily fund operating expenses of the FAA and the air traffic control system. Contract authority for grants to State and local Governments for airport improvements would be frozen at $1.7 billion per year from fiscal year 1998 through 2003. After taking into account projected inflation, the purchasing power of grants under the AIP program would decline 10.7 percent by fiscal year 2003.

    A much larger aviation program could be supported. The president's budget, unfortunately, fails to use all of the projected user fee revenues into the Airport and Airway Trust Fund to upgrade and improve the nation's air transportation system. By fiscal year 2003, it is estimated that the unspent balance in the trust fund will balloon to $25 billion from $9 billion in fiscal year 1998.

    The president's budget proposal for construction and rehabilitation for transportation does not keep pace with projected inflation, resulting in a decline in real Federal spending for construction and rehabilitation of 5.4 percent by fiscal year 2003.

    As you are aware, the National Civil Aviation Review Commission called for a mechanism that ensures the FAA's funding and financing system received budgetary treatment that secures the linkage of aviation user fees in aviation investments and shields these expenditures from discretionary budget caps.

    Our current budget procedure suggests that the only way to finance Federal expenditures is through taxes. We have a budget that is reported on a cash basis. Whenever expenditures exceed tax revenues in a fiscal year we call the resulting difference a deficit which suggests a shortcoming or failure that has to be fixed. This terminology has forced us to frame budget policy and financing issues within the straitjacket of achieving a balanced budget and avoiding a deficit.
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    Balancing the budget has been an overriding preoccupation of Congress and the president for the past 15 years and it has had an effect on public policy by impeding the ability of the Federal Government to respond to investment opportunities that have long run economic benefits.

    ARTBA has been leading an effort to remove the four Federal transportation trust funds off budget. This would eliminate the incentive for Congress to use the unspent balances in the trust fund to mask deficit financing of other Government expenditures.

    Ten years ago ARTBA formed a public private ventures division. The division promotes cooperative efforts between Governmental organizations and private entities to develop feasible financial solutions to complete projects for which insufficient Governmental funding is available. The division includes leading Wall Street investment firms, among other business leaders, in the effort to develop innovative financing for transportation infrastructure improvements.

    We believe that innovative financing techniques, as have been included for highway projects in Senate Bill 1173, are an excellent way to supplement the Airport Improvement Program.

    In conclusion, we thank the subcommittee for this opportunity to present our views on this critical transportation issue. The AIP program is a significant component in maintaining the safety and efficiency of the nation's intermodal transportation system. The program and the benefits it provides are also integral to ensuring the continued economic prosperity that has enabled the Federal Government to achieve a balanced budget.
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    As this subcommittee proceeds with this year's reauthorization of the Federal Aviation Administration programs, the American Road and Transportation Builders Association pledges to work with you to ensure your effort to successfully address the needs and goals of the Airport Improvement Program.

    Thank you very much for the opportunity to appear before this committee today.

    Mr. DUNCAN. Thank you very much, Mr. Drinkard. Mr. Pease?

    Mr. PEASE. Thank you, Mr. Chairman.

    Mr. Hudson, this was not on my list of things that I was going to ask about, but one thing you said caught my attention, and that was that the FAA had granted over 300 variances from safety regulations and had done so behind closed doors and without disclosure. If that is the case, how did you know about it?

    Mr. HUDSON. For one thing, that number came out of a meeting I had with the head of regulation for the FAA. But there is a general listing of these things in the Federal Register, but not the details. In many cases, the specifics are completely shrouded on the basis that they represent proprietary information.

    The one that has us most concerned is last week the FAA suddenly overrode a very long-standing rule for certifying new airliners that has always required that they have an actual full-scale emergency evacuation test. On March 17th, the FAA said that it was overturning that rule for two new jumbo jets, one by Boeing and one by Airbus, and I attached the release to my written testimony.
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    That is like violating, in our view, the first commandment on emergency evacuation. They are going to substitute analysis, paper analysis for an actual test.

    Mr. PEASE. Then do I understand that there is disclosure, you just do not like the kind of disclosure or the substance of the decision?

    Mr. HUDSON. There is disclosure of the general number but the specifics of many of these exemptions are not disclosed. I can give you other examples, if you wish.

    Mr. PEASE. It seems to me that your statement was not accurate, that there is in fact disclosure. You just do not like the extent of the disclosure.

    Mr. HUDSON. The example that comes to mind on non-disclosure most readily is that several years ago the FAA had proposed changing the aisle width from 20 inches in emergency exits to make it the same width as other aisles. I served on the emergency evacuation subcommittee advisory group. There was a bit hue and cry against that. They ultimately decided not to change the rule. However, we learned that waivers or exemptions had been granted to many airlines to do it anyway.

    So the question becomes, why have some of these safety rules if they are going to be granting exemptions at the level of several hundred a year.

    Mr. PEASE. So I am back to my original question. Your concern is with what is being done, not the fact that it is not being disclosed?
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    Mr. HUDSON. Our view that in order to grant an exemption from safety regulation there should be full public disclosure and it should be strictly limited in duration.

    Mr. PEASE. Thank you. It would have been helpful if you had said that the first time, instead of the way you said it, but thank you for your clarification.

    Mr. West, can you tell us a little bit more about the practice of fractional business ownership of aircraft? As I understand it there are proposed regulatory changes being considered right now by the FAA on that subject?

    Mr. WEST. Yes, it is interesting. The FAA General Aviation Forecast Conference that I mentioned, which is going on in Houston right now, had an active panel involving the president of one of the fractional owner providers, Bombardier Business Jet Solutions. He did a really good job of explaining the industry and how it works.

    The association I represent had a Board meeting 2 weeks ago and the Board passed a resolution about preserving Part 91 for non-commercial business aviation transportation. As you know, there are three basic areas. There is commercial, general aviation, and military. The business aviation operations, the fractional ownership operations currently are all within Part 91.

    I think what you are talking about is that there are suggestions that fractional ownership be Part 135. I think those companies speak very well for themselves in terms of talking about the difference between a fractional ownership and a charter company. But the primary difference, as they explain it, is the degree of ownership and control. They are making the argument that it is very much like a Part 91 operation that they currently fall under.
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    It is a growing element of the business aviation community. We recognize it and appreciate it as an example of the flexibility and the creativity within our community on how companies, small, medium and large, are able to rely on these types of aircraft operations for time critical, productive travel to further their business activity.

    It is reaching a whole new market that would not have otherwise been able to take advantage of this type of time critical travel. It is just, again, the example of flexibility and freedom to be creative.

    Mr. PEASE. Mr. Chairman, could I have unanimous consent just for a couple of more questions?

    Mr. DUNCAN. Sure.

    Mr. PEASE. Thank you.

    In the earlier panel, there was some discussion of excluding potential pilots from the profession of being a pilot because of requiring them to pay for their own training. Has your industry experienced any problem with finding enough qualified pilots?

    Mr. WEST. Actually, there were other members on the FAA General Aviation Conference panel yesterday that represented two companies that actually are corporations that have their own flight departments. They think the entire aviation community is very challenged with finding the qualified people they need for now and in the future.
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    There is a program that the general aviation community has initiated called GA Team 2000, which is dedicated to encouraging student starts, especially since because you are not getting the pilots that you used to from the military. The major issue is the interest level of the younger people who are deciding what they are going to do with their lives. The idea is to encourage younger people to explore the opportunities that exist in aviation, especially as pilots.

    I think the market for pilots is a very critical issue for the future. Everybody in the aviation community is faced with it.

    Mr. PEASE. I would like to explore this with you more. I know we are running late today.

    The reason is in my district there are two universities that train pilots, and they are both excellent universities and do a great job. What I hear from them is they cannot place their pilots, that there are not enough people willing to hire them.

    I do not understand how I am hearing something different today from what I hear from the universities.

    Mr. WEST. Can I ask a question? What kind of pilots are they? Are they trying to go commercial or are they trying to go——

    Mr. PEASE. Commercial. They also have Air Force ROTC programs and a lot of their pilots do go through Air Force ROTC and become Air Force pilots, but I am talking about the commercial side and—general aviation, of course, they can go fly wherever they want. But the ones that want to be commercial pilots do not seem to be getting placed. I assume it is not because of the quality of the program because they are outstanding universities.
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    Mr. WEST. It is a very competitive field, as well. I know the commercial airlines hired some very large number last month. I do not know the exact number, but companies and airlines are hiring. It is just they are trying to hire the best.

    Mr. PEASE. Of course. Well, I guess we will talk more about it in a follow up.

    Ms. Kane, I am curious, I have been working in the area of noise mitigation in a couple of airports in my district, including the fact that my home is in a flight pattern. But one of the things I have not understood is why some airports will buy single family residences, and I understand if you reduce the value of that home because of an increase in the noise in that area that they have a responsibility to do that. And then they just tear them down instead of, I guess, reselling them to folks with a covenant that says you understand this is going to be noisy.

    Can you explain why we do that?

    Ms. KANE. That is really a local option of the airport operator. We do not—the FAA's guidelines say that residential use is incompatible within what is called the 65 LDN contour. And so I do not think you would be able to use AIP funds to buy a house and then resell it, if it was within the 65.

    The problem is that almost all of the surveys that have been done show that the actual incompatibility, in terms of what people perceive and in terms of environmental pollution, is really at 55 LDN. We have a lot of our community members—and locally Dulles Airport, Loudoun County around Dulles is an example—that has zoned residential only outside the 55.
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    But there is no real backing for that and the communities are really at risk because the FAA says 65 and if a developer or land owner wants to challenge that, there has been not a lot of backing. It is one of the things that we are asking for, is that there be some recognition that 55 really is where it ought to be.

    I would say personally it would be foolish to resell it. Some people will buy those homes with the easements, what they call abigation easement, and then two or three sellers down still complain. So it is probably better to just not have the residential in that area, residential use.

    Mr. PEASE. Thank you. Thank you, Mr. Chairman.

    Mr. DUNCAN. Thank you, Mr. Pease.

    Ms. Kane, you mentioned the noise project in San Francisco costing $130 million. Has your organization made any kind of estimate as to how much should be spent on noise abatement projects around the country? Do you have any rough guess?

    Ms. KANE. We have not totaled it. I just used that as one—that is a multi-community program at San Francisco and it involves about a dozen communities and it is primarily sound insulation within the 65 LDN contour to insulate those homes to a standard where you are not bothered by the noise inside.

    The National Civil Aviation Review Commission in its report simply pointed out that even at the $1.7 billion level there is nowhere near—if you just look at the airport noise mitigation grants that are pending, the applications that have come in, you are probably talking two, three, four times as much money could be spent on that.
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    If you are looking at capacity for the future, if you are looking at preventing, at these smaller airports or regional airports, where air cargo and reliever airports are being developed in order to prevent problems in the future.

    Some of it is mitigation. We believe there is a major commitment that is also needed to continuing the research for quieter aircraft engine. This research primarily comes out of NASA's budget and has been very, very promising.

    I am leaving this evening to go out to the steering—we serve on the steering committee of the NASA/FAA research project. There has been some very significant developments there working with the aircraft industry, with the engineer manufacturers, for quieter aircraft.

    The NASA administrator has set, as a goal, on the 20 db reduction in perceived aircraft noise in 20 years. This takes some long term significant funding there, particularly through NASA, to achieve this. And then some regulations in place.

    Mr. DUNCAN. We have already required Stage Three aircraft.

    Ms. KANE. We have. We have, and that Stage Three requirement followed the technological development of quieter aircraft. That is, once the engines were possible to be made and were economically feasible, then the regulatory requirement came in. We are moving towards that.

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    There is a wide variety in Stage Three. Some of the hush-kitted retrofitted engines barely make the Stage Three. There are other Stage Three aircrafts that we would really say are more like stage three-and-a-half, they are at the top end.

    Mr. DUNCAN. I remember last year our subcommittee went to Memphis and we saw the Federal Express night sort and we saw those planes lined up coming in. I asked the Federal Express people did they get many complaints about all those planes coming in so late at night. They told me that they had so many people who worked for Federal Express or who had relatives who worked for Federal Express, or other people who knew the importance of that company to the Memphis area.

    And then Congressman Vern Ehlers from Michigan said that reminded him of a friend of his who lived right next to railroad track, and the noise from the trains used to drive him crazy, until he went down and bought several shares of stock in the railroad company. He said after that he was not bothered by the noise anymore.

    Ms. KANE. I will say to you, Federal Express—not to call names, but Federal Express has been ahead of the curve in using the Stage Three. There are other of the air cargo operators who we believe may have some difficulty making the final Year 2000. In those airports we do have members of——

    Mr. DUNCAN. Are these noise complaints going up or increasing? What I am getting at is this, that while over the last few years, the last 2 or 3 years, while the number of passengers has been shooting up, the number of operations at airports has been staying relatively the same because the airline companies and others have been coming up with more efficient uses of their aircraft, flying planes that are more full.
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    And so the operations have stayed basically the same. But has the number of noise complaints at airports around the country been increasing?

    Ms. KANE. It varies. We know, for example, at the new Denver airport, which was moved way out, there were tens of thousands of complaints and there is now some litigation going on.

    Mr. DUNCAN. Yes, but we have heard testimony about Denver. Denver has gone way down in number.

    Ms. KANE. The promises that were made, the community believes, have not been fulfilled. It is partly a function of contrast. When you bring noise into areas where there has not been noise before it is perceived much more strongly. There have been increasing concern about overflights.

    Mr. DUNCAN. In fact, they found at Denver that several thousands of those phone calls had come from the same home.

    Ms. KANE. There is some of that, but there is also—particularly when aircraft go into a new area, and we see it with the smaller airports that are getting commercial service. Maybe total operations are the same but it is shifting where it is. That is why we think the quieter engines are really going to be a very important part of solving the problem.

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    Mr. DUNCAN. I do agree with Mr. Pease, that we local governments could allow people to live in some of these areas but get them to sign a covenant or a waiver if they want to build or buy a home in a certain area, so that some of this problem is alleviated.

    Mr. Davidson, let me say welcome to you. You know, I am very familiar with your company. Mr. Cannon is a long-time friend of mine. Of course, I know that he is no longer actively involved with your company, but your company is one of the leading companies certainly in our area, and it is a pleasure to have you here with us this morning.

    Mr. DAVIDSON. Thank you, Mr. Chairman.

    Mr. DUNCAN. Let me ask you this, is this typical or a frequent thing that happens, or is this just some real off-the-wall extreme example that you have given, like on this project, this runway project in Wisconsin that should have cost $300,000 and it ended up costing over $1 million and it took twice as long to complete because of all the paperwork and all the environmental requirements and so forth?

    Mr. DAVIDSON. Regrettably sir, that tends to be more the norm than the exception because of the number of diverse agencies that are involved in the review process, and just no emphasis for them to get together and establish a common agenda and goals for the project. You have to piecemeal it one at a time and it is a very long, frustrating pro-active process.

    Mr. DUNCAN. I will tell you, I have supported most of the tough environmental laws in this country, but we are getting very close to going overboard because of environmental extremists, most of whom are always very wealthy and I think most of whom are backed up by maybe some extremely big businesses who benefit from putting all these requirements in that the costs and the benefits are getting way out of whack.
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    You know who it is really hurting? It is hurting the poor and the working people, the lower income people because all this red tape, all these regulations are driving up the cost of everything. They are driving up prices. In the end, they are destroying jobs.

    It is really a shame and I am not surprised at what you just said, but I think it is a real shame that when you say this is more the norm than the exception, that projects are costing us three times what they should have or more than three times. That is really sad and it is really something we should work on.

    Mr. Hudson, you know, most people think that airline deregulation has really been a good thing and has brought down prices for airline passengers and so forth. Also, we have been concerned in this subcommittee—in fact, we are trying to come up with some legislation because we feel there are pockets where deregulation does not seem to have worked or it does not seem to have benefitted people. And sometimes we have quite a few smaller or medium sized cities where it costs more to fly 300 or 400 miles than it does some people to fly all the way across the country or to Europe.

    Yet you advocate a 50 cents per mile cap in your testimony. Is that not re-regulation, and do you dispute all these studies that have shown that deregulation has really been a good thing for the airline passenger and has held down costs and prices and so forth?

    Mr. HUDSON. We are now in the 20th year. The 20th anniversary of airline deregulation is this year. Until the last 2 years or so, I would agree with you. The overall statistic, I believe, is that fares have come down about 37 percent during that period.
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    But since the last recession ended, particularly in the last year or so, there has been an enormous increase in airfares. We believe there is a whole array of anti-competitive practices that the airlines are engaging in, and to some extent, even some of the major airports.

    We would characterize $1 to $2 a mile airfares as similar to paying $10 to $20 a gallon for gasoline. We think that is out and out price gouging.

    In any decontrolled industry, Government must enforce the level playing field. Because of its history of regulation, the airlines have been exempt from many of the restrictions that Government has to level the playing field. Those things need to be sorted out and corrected.

    In the interim, we think that the Government needs to move quickly to stop price gouging, otherwise we are going to very quickly go from a decontrolled system, where there is true competition, to one at least in smaller markets where the sky is literally the limit.

    Mr. DUNCAN. Well, I have asked some of the airline people about that, because I think it is very clear that no matter what the industry, that competition is the best way to insure both a decrease in cost and an increase in quality. And yet, in areas where you have no effective competition—I mean, we are seeing that now, to some extent, in cable television and the big increases that are going up there.

    But I have been told that we may not see some of these big increases that you mentioned just a few minutes ago, and I hope that we do not, but these ticket prices have been going up really, as you have pointed out, far faster than inflation. I think that is something that we need to keep an eye on.
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    Mr. West, thank you very much for being with us again. I will tell you what, as you tried to point out, business aviation is very important to our economy. And as I have said before, even people who do not fly benefit from a good aviation system and a good active business aviation system because it helps the whole economy and helps improve our quality of life and our standard of living.

    I am going to give you a chance, sir, to respond to Mr. Poole and others who say that general aviation, and particularly the business aviation community, is not paying its fair share of the costs and that we need to go to some sort of revised user fee type system.

    Mr. WEST. I am glad you asked that question and it is interesting for me because 10 years ago, when I joined NBAA, one of the first responsibilities I had was to fly cross country and debate, on some NBC channel out in Burbank Robert Poole. We were debating and discussing airport privatization at the time. Little did I know, 10 years later, that he would be here saying what he said today.

    It is interesting when I think about. I do not mean this in a derogatory sense. My tongue is thoroughly in my cheek. But, he is with the Reason Foundation and reality, the real world of business aviation, which I emphasized earlier, does not provide a foundation for his reasoning.

    The NCARC did not drop the ball. Nor has Congress dropped the ball over the years in terms of their understanding of the different elements of the aviation community-commercial, military and general. The NCARC and Congress have also fully understood the definition of commercial and non-commercial.
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    Reasoned and reasonable analysis clearly indicates the following: Business aviation operators are incremental users of an ATC system designed primarily to accommodate the demands of the commercial airlines and their passengers. We had a study done, a risk assessment of the cost allocation scheme that pointed out that there was an 80 percent probability that the maximum level of costs driven by the general aviation turbine aircraft community that Bob is focusing on, is no more than $151 million, versus maybe some study that he was looking at.

    General aviation turbine aircraft used for business pays the bulk of the general aviation fuel tax. And, as I mentioned, those companies that use those aircraft purchase billions of dollars worth of airline tickets every year, paying the ticket taxes, as well. I would say a lot of times those are the full fare tickets because those are the business travelers.

    Another point is the vast majority of our member companies are small and medium sized companies, some 67 or 68 percent of those companies. I will also point out, in looking at his testimony and hearing him, he suggested that a corporate jet flying millionaire executives cross-country is clearly a commercial purpose and a direct substitute for a first-class airline ticket.

    As I mentioned, the business aviation operations compliment the airline system. The scheduled airline system, which I used to work for when I was with Delta, before NBAA, is a marvelous system but it cannot satisfy all the needs out there. That is why you have a general aviation community. That is why you have different elements of our community out there viable today. You all know that better than me.

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    The other thing is, in that vein of executive millionaire flying around, 86 percent of our passengers are not top management. If they were to look at the diversity in the utilization of business aviation, if you look at the ''Real World of Business Aviation'', Bob Poole and others would have a more reasonable understanding of what it is all about. Instead of resting on the misinformed, as I call it, populist view that has not done the homework.

    Mr. DUNCAN. Thank you.

    Finally, Mr. Drinkard, let me ask you, the Airport Improvement Program was funded at a level of $1.9 billion in 1992. But since that time it has gone down slightly, $1.7 billion this year. But now, of course, in the middle of the game so to speak there is a proposal to use that program as one of the offsets to fund the operations in Iraq and Bosnia.

    What do you think the effect, if we fund the Airport Improvement Program this year, it is $1.425 billion right? The proposal is $1.425 billion. That is just on that.

    What do you think will be the result of something like that, funding at that level?

    Mr. DRINKARD. Well, representing the real cross-section of folks involved in airport design and construction, that is obviously going to have a marked effect on our jobs. It would be projects that may be in the process of being started now that would be stopped. Obviously, the construction industry would not benefit from such a cut.

    What it would also mean is there are true projects that are priority projects, safety projects, on the airports that I work at, runway extensions, runway overruns that we have heard about this morning, that would have to be delayed. So as that number keeps going down, not only in our industry are you tinkering with our job security, you are obviously tinkering with the safety of the airport system.
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    Mr. DUNCAN. I can tell you that I believe very strongly that we need to be spending money here instead of trying to solve every problem in Bosnia and Iraq and places like that, but I think we have been very excessive in what we have spent in some of those places. I think we are now up to about $8 billion in Bosnia.

    On the other hand, I am very, very skeptical about the costs of some of these projects that we do. I think we need to question those very, very closely.

    We heard last week in here about a new runway in St. Louis costing $800 million. Of course, we have had the projections of the runway proposal in Seattle, $450 to $500 million, and the opponents say it will end up costing almost $1 billion. I think about that in relation to $1.425 billion, and you can see that I do not know, it is going to be very difficult to resolve all of that.

    I want to thank all of you for being here, and the testimony you have given. You have been very helpful. I am going to turn it over for closing comments to my ranking member, Mr. Lipinski.

    Mr. LIPINSKI. Thank you, Mr. Chairman. I apologize to the panel. I had to step out and meet with some people, I had an appointment scheduled for quite a long period of time. Fortunately, it pertained to aviation, also, so I was not completely detached from the aviation field.

    Mr. Chairman, I am not going to have any questions for this panel. We have all been here a long time today.
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    I simply want to say, I appreciate very much their testimony here. It is all very enlightening and illuminating.

    I do want to say to Mr. Drinkard there, you were talking about the bill that we passed yesterday, and you talked about the $29 billion surplus we had in the Highway Trust Fund. Well, with the bill that we passed yesterday, we no longer have that surplus. That $29 billion is being taken and put on deficit reduction. So the trust fund will be zero.

    And one quick question to Mr. Hudson. In light of the fact that the rescissions that they are coming in with to fund the emergency supplemental appropriation is taking $275 million out of the AIP funding for this year, as the Chairman mentioned, are you still opposed to any potential increase in the PFC?

    Mr. HUDSON. Frankly, we never expected that that so-called surplus would ever be used.

    Mr. LIPINSKI. I am not talking about the surplus to you. I am talking about the fact that in the AIP bill the funding for the year was supposed to be $1.7 billion, and with the rescissions that they need to make here in order to pay for the emergency supplemental appropriation for Bosnia and other places, that is being reduced by $275 million. So instead of $1.7 billion, we are down to $1.425 billion for this fiscal year in AIP funding.

    I thought maybe, in light of that, you might reconsider an increase in the PFC.
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    Mr. HUDSON. I do not believe we would. It is our feeling that a user tax that is sold to the public that way should be a user tax. And if there is a reduction, it should result in a reduction in the tax.

    I did study the testimony that was given last week by the airport authority people, and particularly the person from the Dallas-Fort Worth airport. It seems to us that, just looking at the Dallas testimony, that the amount of the PFC that they were looking at, either the existing amount or the amount they wanted increased, was somewhere between six and 20 times the reasonable debt service of the capital improvements that they were looking at.

    The idea that either of these things, particularly the PFC, should be used for capital improvements is rapidly being overtaken by the idea that it can be used as a revenue source to satisfy bonds, and the bond community is coming around to that.

    We believe that the best course for the PFC is to keep it steady and if it does stay steady the credit markets will open up and they will be able to borrow usually 10 times for every dollar.

    Mr. LIPINSKI. Actually, when we first passed the PFC legislation, which I was very much involved in, one of the potentials of that was the bond market and the revenue source coming from the bond market. I am surprised it has taken as long for that to develop as it has.

    Nevertheless, as I said, I am not going to keep people too much longer here. Mr. Chairman, I appreciate their attendance, your attendance, my attendance, and let us move on.
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    [The statement of Mr. Costello follows:]

    [Insert here.]

    Mr. DUNCAN. Thank you very much.

    [Whereupon, at 1:06 p.m., the subcommittee was adjourned.]

    [Insert here.]