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THE ECONOMIC IMPACT OF AIRPORTS AND AIRPORT IMPROVEMENTS ON THE COMMUNITY AND THE ECONOMY
Wednesday, February 10, 1999
U.S. House of Representatives
Subcommittee on Aviation
Committee on Transportation and Infrastructure
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:32 a.m., in room 2167, Rayburn House Office Building, Hon. John J. Duncan, Jr. [chairman of the subcommittee] presiding.
Mr. DUNCAN. [presiding] We are going to go ahead and call this hearing to order. I want, first of all, to say, ''Good morning and welcome everyone to this second day in a series of hearings on FAA reauthorization.''
Today we will be focusing on airport financial needs and the benefits that airports provide to the local and to the national economies. Since this is really a continuation of a hearing that we had last week, I will make my comments very brief.
Last year, the General Accounting Office testified, and airport interest groups agreed, that airport needs are approximately $10 billion a year. Some have said that in future years, those needs will be even higher because of the great increases in both air passenger and air cargo transport.
Today we will hear again from these groups and others about the growing needs of airports. Unfortunately, we will also hear that airport infrastructure investment is not meeting the needs that are out there now.
Airports are crucial to any community's ability to grow. We often hear representatives from local communities say that the airports need to be expanded or otherwise they will lose local businesses and will not be able to recruit and attract new business.
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Today we will hear witnesses focus on the benefits of airports to communities and to local economies. In addition, as I have attempted to point out at times, everyone benefits from a strong aviation system, even people who never fly or never come near an airport because, of course, the overall help to the economy and to the standard of living that makes all of our lives better in many, many different ways.
I welcome the witnesses we have here today and thank them for taking the time out of what I know are very busy schedules to be here for today's hearing.
And I now recognize Mr. Lipinski for any statement that he wishes to make.
Mr. LIPINSKI. Thank you, Mr. Chairman. I particularly thank you for holding this meeting today, Mr. Chairman, and I would like to apologize to everyone for missing last week's hearing. I understand that the hearing produced a very good discussion about the safety needs of our national aviation system. Again, I am sorry for having missed that, but I have read all the testimony and brought myself up to date on it.
Today's hearing will focus on the positive economic impact of airports and airport improvements on communities and the economy.
I have lived only a few blocks from Midway Airport in the city of Chicago for most of my adult life, and I know firsthand how important airports can be to a community. I have often said that the engine that drives economy development and job creation throughout my entire congressional district in the southwest side of Chicago and the southwest suburban community adjacent to it is Midway Airport.
Midway Airport is in the beginning stages of a multi-year, $722 million terminal development program; $138 million of which will be provided by the FAA AIP program. Proceeds from the passenger facility charge have also been pledged for the program through the year 2030. The terminal development program will created a new terminal to replace the current terminal which was designed in 1945 and can no longer accommodate the number of passengers traveling through Midway Airport.
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According to the city of Chicago, the new terminal at Midway will create 14,000 new jobs by the year 2010 and will generate more than $540 million in additional annual personal income. Construction of the terminal, parking facilities, and new roads will create 1,500 construction jobs, alone. Concession revenues at the new terminal are excepted to jump to 76 percent over current levels. An increase in concession activities will create more jobs. The positive economic impacts of Midway's terminal development program are obvious. And I am glad that the Federal Government has made a financial commitment to support this program.
While Midway Airport is the economical engine for my congressional district in the southwest side of the city of Chicago, Chicago's O'Hare International Airport is a vital economic engine for the city of Chicago, the surrounding suburbs, and the entire State of Illinois. It is estimated that O'Hare contributes up to 455,000 jobs and approximately $34 billion annually to the greater Chicago economy.
Unfortunately, operations at O'Hare are unnecessarily restricted by the High Density Rule. At O'Hare, the High Density Rule no longer serves its intended purpose of reducing delays in congestion. Instead the rule places an artificial limitation on operations at the airport which limits the economic benefits of the airport.
I support lifting the High Density Rule because both the traveling public and the local community would benefit from a slot-free O'Hare International Airport.
The city of Chicago benefits greatly from its world-class airport system. In fact, no other activity or industry has a greater impact on the Chicagoland economy than O'Hare Airport.
I look forward to hearing from our witnesses today about the economic impact of other airports throughout the Nation.
We all know that aviation is vital to our national economy and that airports are one of the most important parts of our national aviation system. We must invest enough through both AIP grants and the PFC funds to meet the infrastructure needs of airports today so that we can continue to drive economic development in the 21st century.
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Thank you, Mr. Chairman. I yield back the balance of my time.
Mr. DUNCAN. Thank you, Mr. Lipinski.
And I know you are just getting settled in, Mr. Oberstar, but do you have a statement at this time?
Mr. OBERSTAR. Mr. Chairman, I will wait for the others to go first.
Mr. DUNCAN. OK; all right. All right.
Mr. Boswell has no statement.
Mr. McGovern?
Mr. Holden?
Well, I guess we are at Mr. Pease.
[Laughter.]
All right. Do you have——
Mr. OBERSTAR. Yes. I have——
Mr. DUNCAN. —any statements that you wish to make?
Mr. OBERSTAR. —a few words, Mr. Chairman.
Mr. DUNCAN. All right.
Mr. OBERSTAR. If I may.
Mr. DUNCAN. Sure; go right ahead.
Mr. OBERSTAR. And I thank you very much for continuing proceeding with these very, very important hearings on the critical airport infrastructure needs.
And I look out over the audience gathered here to hear our deliberations, and I see the ''cream'' of aviation out there—certainly the ''cream'' of airport interests. And somewhere In the group is former Secretary of Transportation, Sam Skinner, and—there he is in the front row. Mr. Secretary—if I may, Mr. Chairman, address him for a moment.
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You presided at the Department in participation with this committee, with Bill Clinger and me, over what you called the ''aviation act of the century.'' We made extraordinary advances in funding the needs—the true needs, the real needs, not the wish lists—of airports around this country. You advanced the cause of aviation in every respect: in safety, in security, and airport construction requirements. And under your vigorous and dynamic late-at-night, leadership, we mastered the issue and muscled the votes and brought a very contentious issue through committee and to the floor and through conference and to the President's desk for signature and advanced the cause of aviation, including airport noise restraints that are now reaching every bit the fulfillment that we had anticipated when we crafted that legislation.
I salute you, as I have done many, many times, for the extraordinary service you provided our country.
Notwithstanding the expectations that Secretary Skinner and his able assistant at the time, Mr. Hauptli, provided in cooperation with our committee, the needs of airports are growing, and they are growing because we haven't funded those requirements. We did for two years, the past—the final two years of the Bush administration, and then budget cutting caught up with aviation, as with many other programs. But what was serious for me is that the compact that we crafted was broken here on the Hill, between the Hill and the executive branch. And now we have a funding gap of as much as $3 billion annually, with capital development requirements of some 3,304 airports analyzed by GAO, by the FAA, by the Air Transport Association, and those needs are not being fulfilled.
The latest budget that we have received—that is the budget for the next fiscal year—cuts below this year's funding level, a $350 million reduction—actually, from the budget level that we had in 1995, not precisely from this year. This cutback is, in effect, the ''poster child'' for why we need to increase and why we need a new authorization, why we need to unlock, most importantly, the Aviation Trust Fund, and why Chairman Shuster has made that his top priority and which I join.
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If we continue at this level of underfunding, under investing, we will have a $60 billion surplus in the Aviation Trust Fund by the next decade. That is unacceptable. We set out to turn that around in 1990, and we did. And there is no excuse in this era of budget surpluses for allowing another trust fund to soar to unacceptable levels, cover up deficit in order to fund other programs. We are not going to let that happen in this committee.
And under the leadership of our chairman, Mr. Shuster, and the leadership of this subcommittee, we are going to move trust fund off-budget. We are going to address the needs of airports and the needs of growth of aviation in this country for the decade to come. We ask everybody to join in that initiative.
Without that trust fund off-budget, without the guaranteed revenue stream, we will continue to fall further behind as other countries invest in ever-greater airport capacity schemes.
Almost two years ago, this committee did a Pacific Rim trip. We stopped in Japan to see the airport at Kansai, a $15 billion project in the ocean, and another $12 billion runway being planned and underway to be developed, also, in the ocean. In Hong Kong, we saw $25 billion, two parallel runways, a mile-plus separation for the two 12,000-foot runways, built in the ocean. They literally blew up a mountain, dumped it in the ocean, and built an airport on top of it. They handled 90 million passengers in less than a decade.
If little Hong Kong, 6 million people, can spend $25 billion on an airport, why can't we get our funding up to the level that we need and that we require in this country to serve half of all the passengers that fly through the whole world. They fly right here in our airspace.
And then you go across the water into the mainland of China, where I just completed a visit with the top leadership in Chinese Civil Aviation Authority and others. A $100 billion program of investment in airports to build 6 new airports, to modernize 35 other airports, to bring them up to FAA standards—not to British airport standards, not to French standards, but to U.S. FAA standards—so that every airline in the world can land without question in Chinese airports.
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At Shanghai, they have completed two 12,000-foot runways, the mile-plus separation, nearing completion on a terminal that is one-and-one-half times the size of Dulles Airport terminal, three others planned, four more runways planned, capacity of 80 million passengers. Ninety percent of all the 747's that ever flew in the world operate in the Pacific Rim. If they can do it, we can do it. And we are starting on that course now with this hearing this morning.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Mr. Oberstar.
Vice Chairman Sweeney.
Mr. SWEENEY. Thank you, Mr. Chairman, and thank you, Congressman Oberstar.
I am excited to be here, and I thank the distinguished members of our witness panel for joining us today. Your insights on the financial needs of airports, the FAA, and the aviation system will be invaluable, especially to freshmen members like myself.
In particular, I am anxious to hear the testimony of Mr. Plavin and the Honorable Samuel Skinner, our former Secretary of Transportation. I am interested in hearing your views on how increasing funding for the Airport Improvement Program is critical to the needs of smaller airports and how to use the passenger facility charge to help fund those needs, most importantly, enhancing competition.
I represent a mostly rural district in upstate New York that is served by one airport, the Albany Airport. And although still classified as a small airport, Albany has undertaken large-scale improvements in the past year. And now, it is termed an international airport.
These improvements will have a tremendous impact on my region, but because of the smaller volume of traffic from Albany to New York and Washington, as well as existing slot rules, airfares to and from Albany are absurdly high. In fact, it would be cheaper for me to fly to Europe than it is for me to fly back and forth to home each week out of Washington. So, unless we move this committee to Brussels, or someplace thereabouts, something has to be done about that.
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My complaints aren't alone. In fact, a number of businesses in my district have already relocated, and others are seriously considering moving to other parts of the country, citing high airfares as the major factor in their decision. So for those from my home to continue to call that great place in world ''home'' and to continue to have an opportunity to live their lives in that great place, something needs to be done about airfares and the access to service.
I am committed to fighting to find a solution to these problems, and I look forward to discussing them with you today and hear how airport investments may help improve the competitiveness, the competitive environment, in the aviation industry and how I can bring that back home.
Thank you very much.
Mr. DUNCAN. Thank you very much, Mr. Sweeney.
Mr. Costello.
Mr. COSTELLO. Mr. Chairman, I thank you for calling the hearing this morning. I won't go into—I just asked my colleague and our friend, Mr. Oberstar, why he doesn't really tell us how he feels about the matter.
[Laughter.]
I would just say, ''ditto'' to his comments, and I look forward to hearing from our witnesses, in particular, our colleague Mr. Ford, from Tennessee, and my friend, Sam Skinner, who we worked with for many years.
And I thank you for calling the hearing.
I ask unanimous consent to insert my statement in the record.
Mr. DUNCAN. Thank you very much. Your statement will be placed in the record.
Ms. Norton.
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Ms. NORTON. Mr. Chairman, this is a very important hearing and a very important start to this committee's work.
May I say that I would be particularly interested in panel 2, particularly in the testimony of Mr. Button, because on another matter, Mr. Button has done a study of the economic effects of slot and perimeter rules and——
[Laughter.]
—as we speak together in the other body, Senator McCain is marking up a bill that would dramatically change slot and perimeters rules around the Nation, beginning here in the Nation's capitol. And his major rationale is that the present rules are anti-competitive. It would appear that there are profound secondary effects that have enormous economic consequences when slot and perimeters rules are changed. In this jurisdiction covering Virginia, Maryland, and the District of Columbia, the effects, in addition, profoundly affect the safety of aviation.
For that reason and because of the subject matter of this hearing, I think it is a very auspicious and important beginning.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you very much.
Mr. Menendez.
Mr. MENENDEZ. Thank you, Mr. Chairman. I want to thank you and the ranking member for beginning to hold these hearings on an issue that I think is vitally important as the Nation is ready to dawn on a new century.
People look at airports and often just think of it in the context of planes. And I can tell you, as someone who represents a district of one of the Nation's largest and busiest airports, that, of course, it is much more than that. The planes may be the visible part, but the jobs, the commerce, and potentially smart growth are the ends.
Newark International Airport, which is in my district, plays a pivotal role in the northeast transportation network. With a 5.7 percent increase last year, Newark International served more than 30 million passengers. It is now the busiest airport in the region, busier than La Guardia and JFK. It employs over 18,000 people and generates over $11 billion of economic activity to the New Jersey-New York metropolitan region, including over $3.6 billion in wages and salaries, to an area that needs it—an area that, in fact, unemployment is still higher than most of the State, as well as most of the Nation.
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So, while airports, yes, do bring families to their loved ones and tourists to see the wonders that travel have to offer, they also bring products to the marketplace, business people to their clients, and mail and packages from one coast to the other.
So, I hope as we move forward—and I know there are many different facets to the reauthorizations that the committee will be considering, and we certainly have to be concerned about passengers and their rights as well—when we look at airports we should also see the possibility and opportunities for people. And when we look at the emerging global economy, it is clear that those nations that make a commitment to the transportation infrastructure and safety that Mr. Oberstar was talking about are the ones that will succeed in this next century.
Having said that, economic impact can and should be a positive force, but communities need to, also, be considered. Sometimes a community can be harmed, and we need to be sensitive to that. In my district and State, for instance, I have been working with schools on sound insulation and on flight redesign to shift noise away from residential areas. Growth and sensitivity to the larger community needs to be responsibly managed.
But I believe these are issues we can solve, and the challenges we face in addressing them should not take away from our determination to reap the fullest economic opportunities and benefits that airports can bring to their citizens.
And I look forward to the testimony of our witnesses and our colleague, Mr. Ford.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you very much.
Mr. Berry.
Mr. Berry. Do you have a statement, Mr. Berry?
Mr. BERRY. No, thank you, Mr. Chairman.
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Mr. DUNCAN. All right. All right, thank you very much.
Dr. Ehlers.
Mr. EHLERS. Thank you, Mr. Chairman. First of all, once again I commend you for conducting this series of hearings.
I believe this is going to be an extremely important year in the Aviation Subcommittee. We have a great deal of work to do. I look forward to hearing as much of the testimony as I can.
I do want to get on the record and apologize to Mr. Chairman, I have a markup in another committee which I will have to leave for shortly. But I will be back as soon as I can.
Thank you, again, for holding this hearing.
Mr. DUNCAN. Thank you very much.
Our first witness is a member of the panel consisting of a very good friend of mine, a very distinguished member from my home State of Tennessee, Congressman Harold Ford. He is one of the newer Members of Congress that has gotten off to a great start and is developing a very fine reputation, both here and in Tennessee.
And, Congressman Ford, I am pleased to have you here with us this morning, and you may begin your testimony.
TESTIMONY OF HON. HAROLD FORD, JR., A REPRESENTATIVE IN CONGRESS FROM TENNESSEE
Mr. FORD. Thank you, Mr. Chairman, and thank you, Mr. Lipinski. And to all of my colleagues on the committee, I want to thank you for the opportunity to testify and extend a personal thanks to one of your staff members, David Balloff, who worked closely with my staff to make this possible.
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On a personal note, Chairman Duncan, thanks to your steady oversight of our Nation's aviation industry. I think you and I, both, were able to travel safety to and from the Fiesta Bowl to watch our beloved Tennessee Volunteers win the national championship. And for that reason, again, I say, ''thank you.''
Chairman Shuster has declared 1999 as the year of aviation, and this committee, on a bipartisan basis, has made a corresponding commitment to provide resources to upgrade and improve the aviation infrastructure for the 21st century as so many of my colleague, including my vice chair, Mr. Menendez, and others have commented this morning.
As we approach this new century, one of our great challenges will be to create a policy that recognizes the demands of a new global marketplace. More than ever before, our economy is characterized by globalization. And with these new realities, it is inevitable that aviation's role as a generator of commerce will continue to intensify in the foreseeable future.
Nowhere is the impact of aviation more evident than in my district, Tennessee's ninth district. Memphis is the home to FedEx, the world's largest cargo airline. And since 1992, according to the Airports Council International, Memphis International Airport is the world's busiest cargo airport, handling more than 2.2 metric tons a year. In cargo tonnage, Memphis handles more than Los Angeles and Hong Kong, the world's two largest airports. FedEx is also our region's largest employer with a labor force of more than 28,000 employees. Because of the superior transportation capabilities offered by FedEx, dozens of multinational corporations have established a logistics operations in Memphis.
On the passenger side, there are more than 270 daily passenger flights served by over a dozen major airlines in Memphis, including Northwest KLM. I would add that colleague Marion Berry and Roger Wicker and John Tanner and Gene Taylor and Ed Bryant and Bennie Thompson and scores of others either use Memphis as their primary airport or as a connecting airport.
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Our airport is quickly becoming a gateway to the world because of the generosity of this subcommittee and, quite frankly, to the Clinton-Gore administration. For example, last year the FAA awarded a total of $75 million in current and future funding commitments to reconstruct and extend our airport's center runway. When opened, this expanded runway will accommodate fully loaded and fuel aircraft that will serve points in Asia and around the world. It will open new frontiers of competition and opportunity.
This brings me to the primary reason, Mr. Chairman, that I asked to testify today. The Airport Improvement Program is important, not only to my district, but to our Nation. As you know, more than 3,300 airports—small, medium, and large—and you have certainly, Mr. Chairman, been a friend to small airports throughout this Nation—benefit from funding under the AIP. It turn, millions of air travelers benefit from safer, more modern airport facilities. Since 1982, Memphis has received over $180 million for this program, and, as a result, our airport is the central generator of commerce in jobs in our region.
As you craft a long-term FAA reauthorization bill, I encourage you to provide a sufficient and stable funding source to help our airports increase their capacity to implement their noise mitigation plans. This will enable our Nation's airports to continue to provide that safe, reliable, and efficient transportation for millions of Americans.
I would encourage this subcommittee to increase funding for the Airport Noise Setaside Program which falls under the discretionary funding category of AIP. Although airport noise is primarily a local issue, the Federal Government has provided national leadership to assist communities in dealing with its adverse effects. As you know, 31 percent of discretionary grants are set aside for noise compatibility planning and carrying out noise abatement and compatibility programs. According to the FAA, the phase-in of Stage III aircraft by the commercial airline industry has significantly reduced aircraft noise.
In addition, by the year 2007, according to the FAA, there will 36 percent more flights than there are today, and the number of passengers is expected to increase by almost 4 percent a year for the next 12 years. As we depend more on air transportation to meet our travel and cargo needs, we are obligated as policymakers to address the noise that results from this growth.
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As we all know, addressing aircraft noise is a complex issue. It requires a sustained involvement of airport proprietors, State and local governments, community residents, and the Federal Government. In my district, the Airport Authority has made considerable and commendable efforts to address this problem. However, a substantial number of residents continue to be adversely affected by airport operations. These residents have appealed to their elected representatives to respond to their concerns that airport expansion has significantly diminished the quality of their lives, as well as their property values.
It is my hope that increased AIP funding will enable my Airport Authority and others around the Nation to work closely with the FAA and local governments to implement a comprehensive long-term noise mitigation plan that includes both preventative and remedial components.
Finally, I commend Mr. Shuster and, again, members of the committee, Mr. Oberstar, who I know had to leave, for their leadership in advancing H.R. 111, the Truth in Budgeting Act. By providing off-budget treatment for the Airport and Airways Trust Fund, we can ensure that the funds contributed by the air transport industry will be used as they were intended. In turn, the communities like mine will benefit from a more modern transportation infrastructure.
Again, I thank you, Mr. Chairman. I thank the members of the committee for indulging me.
Mr. DUNCAN. Well, thank you, Congressman Ford. I remember three or four years ago this committee went to several aviation facilities around the country, and we went to Memphis and saw the Federal Express operation, and we saw the night sort. And it was after midnight, and we saw all the planes lined up coming in. And I asked, ''Do they get many complaints about the noise with all those planes coming in late at night?'' And they told me that, ''No,'' that so many people in Memphis worked for Federal Express——
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[Laughter.]
—or owned stock or whatever.
[Laugher.]
And I remember—Congressman Ehlers may not remember this, but he said that he had a friend who lived near a railroad track and he said the noise of the trains used to bother this friend until he went down one day and bought 100 shares of stock in the railroad company. And after that, the noise of the trains didn't bother him very much.
[Laughter.]
Mr. FORD. Let me be clear, I am not, by any means, suggesting that——
[Laughter.]
—we want to give up FedEx in my district, Mr. Chairman.
Mr. DUNCAN. I understand.
Mr. FORD. But I do want to make the suggestion that all efforts that can be made—and you have been a leader in this for some time on helping us to mitigate some of the adverse products of having a FedEx and Northwest in your district—that we make every effort. And I am certain that the residents in my districts would be appreciative.
I am like Mr. Ehlers; I own a few shares of stock in that great company as well, but some of those folks in that neighborhood can't afford it, and I know this committee will be sensitive to those needs as well.
Thank you, again, Mr. Chairman.
Mr. DUNCAN. Well, this committee tried to help, and did help, get the new runway at Memphis, and we were pleased to do that. And we will try to help——
Mr. FORD. You didn't help, you did do it, Mr. Chairman.
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Mr. DUNCAN. —in other ways.
Mr. FORD. And we thank you.
[Laughter.]
Mr. DUNCAN. Let me say this: in this subcommittee, we have always followed a policy of not asking members any questions because we know how busy you are and, also, because we have chances to talk to you later on the floor and at other points. And, also, we need to get on to other witness, but thank you very much for being with us today. You have added a great deal to our discussion.
Mr. FORD. Thank you.
Mr. DUNCAN. Thank you very much.
We will now call up the first panel. And we have a very distinguished panel. The panel consists of Dr. Gerald L. Dillingham, who is the Associate Director for Transportation Issues of the General Accounting Office, and he will be accompanied by Paul Aussendorf, who is the Senior Evaluator for the General Accounting Office; Mr. David Z. Plavin, who is president of the Airports Council International; the Honorable Samuel K. Skinner, former Secretary of Transportation, who is now co-chairman of Hopkins & Sutter; and Mr. Todd J. Hauptli, who is the senior vice president for Federal Affairs of the American Association of Airport Executives.
And I believe that all of these gentlemen have been with us on other occasions before, and we are certainly pleased to have each of you back with us today.
We always proceed in this subcommittee by the way the witnesses are listed on the call of the hearing, and that means that, Mr. Dillingham, we will proceed with you, and then we will just—I believe they are seated in that order, and so we will just proceed right down the line.
And, Mr. Dillingham, you may begin your testimony.
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TESTIMONY OF GERALD L. DILLINGHAM, ASSOCIATE DIRECTOR, TRANSPORTATION ISSUES, RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY PAUL AUSSENDORF, SENIOR EVALUATOR, U.S. GENERAL ACCOUNTING OFFICE; DAVID Z. PLAVIN, PRESIDENT, AIRPORTS COUNCIL INTERNATIONAL-NORTH AMERICA; SAMUEL K. SKINNER, CO-CHAIRMAN, HOPKINS & SUTTER, AND FORMER SECRETARY OF TRANSPORTATION; AND TODD J. HAUPTLI, SENIOR VICE PRESIDENT FOR FEDERAL AFFAIRS, AMERICAN ASSOCIATION OF AIRPORT EXECUTIVES
Mr. DILLINGHAM. Thank you, Mr. Chairman, and, Mr. Lipinski.
We appreciate the opportunity to testify again before this subcommittee. This morning's testimony focuses on the maintenance and enhancement of the Nation's airport infrastructure.
My oral summary is structured around three specific questions.
First, how much are the airports spending on capital development, and where is the money coming from? Second, if current funding levels continue, how do they compare with the airports' plans for development? And, third, what effect will various proposals to increase or better use existing funding sources have on the airports' ability to carry out their development plans?
In the first series of graphics, we will be examining the overall funding situation for the 3,300 airports that make up the national airport system. For this analysis, our base year was 1996. This was the most recent year for which we were able to obtain comprehensive data on both the airports' development plans and their available funding.
As you can see, the first funding source is Federal AIP grants that provided about $1.4 billion for airport capital development. Passenger facility charges, or PFC's, provided about $1.1 billion. These dollars represent collections from 264 commercial service airports. That is slightly less than half of the airports that are eligible to collect PFC's.
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State grants added another $285 million to the funds available for airport development. Of that $285 million, slightly more than one-third of that money went to large and medium hubs, and the remaining two-thirds went to the smaller airports.
The single largest category of airport funding, about 58 percent of the total, was tax-exempt bonds. Most of these bonds were secured by an airport's future revenues. In 1996, airports issued about $3.7 billion in bonds. In addition, about $414 million in special facility bonds was issued. These are bonds that are issued by airport sponsors but are secured by expected revenues from the facility that will be constructed rather than by general airport revenues.
Lastly, we estimated that there was about $153 million available from airport revenues. These dollars represent the funds that were available after the airport paid their operating and other expenses.
Now I would like to turn to a comparison of these funds with estimates of planned development costs. To maintain the current national infrastructure and to fund safety, security, and environmental projects, will cost an average of about $1.4 billion annually. These are the projects that represent FAA's highest priority projects. To fund development that would address other FAA high-priority projects such as adding capacity, would average another $1.4 billion annually.
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 of planned development that would not be eligible for Federal funding.
These AIP ineligible projects include projects such as expanding the amount of commercial space in the terminal and the construction of a parking garage. When a comparison is made between the total amount of funds available for development with the average annual cost of planned development, you can see that the estimated cost exceeds the available funding by about $3 billion. We believe that the difference between the $10 billion in planned development and the $7 billion in available funding is a critical issue.
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But perhaps more critical is the disparity between large and smaller airports' capacity to raise the money needed to finance their development plans. When you look at the same data for large and medium hubs only, you see that there was about $5.6 billion of available funding. But as this comparison graph shows, those same airports have an estimate of over $7 billion for planned development.
When we examined the situation for smaller airports, including small hubs, non hubs, and other commercial service and general aviation airports, we found that the funds available for development totalled about $1.5 billion from all sources.
In this comparison graph, we see that the yearly average annual cost of planned development totalled nearly $3 billion. This estimated cost is almost twice as much as the funds that were available to fund it.
Returning to one of our principal points, this graphic clearly illustrates that the difference between 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 the larger airports, where about 80 percent of their planned development was covered.
Turning to our last question regarding the effect of various proposals and initiatives to increase the amount of funds available for development, a couple of proposals to increase airport funding have emerged in recent years, including increasing the size of AIP, or raising or eliminating the ceiling on passenger facility charges. FAA has also sought ways to better use existing funds.
We believe that all of these proposals have merit, but they do vary in the degree to which they help specific types of airports. For example, this graphic illustrates how an increase in AIP funds would help smaller airports more than larger ones. This is the case primarily because, if the total amount of AIP funds are increased, a greater proportion of those funds would go to smaller airports.
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Regarding PFC's—this graphic shows that if the choice is to increase PFC's, it would benefit large airports almost exclusively. For example, for each dollar increase in the PFC ceiling, airports collect an additional $475 million in PFC's. Ninety percent of that would go to larger airports. Therefore, if the Congress decides to increase PFC's, it may want to consider looking at a reallocation of AIP funds in favor of smaller airports. This type of reallocation would be a step towards maintaining the balance of financial capacity between larger and smaller airports.
FAA has also employed a variety of new financing mechanisms, including State block grants and some innovative financing mechanisms, to make better use of existing funds. These initiatives are relatively recent, and some are operating on a pilot basis, but the early reviews are showing some success and benefits for smaller airports.
One possibility that is not currently permitted by FAA is funding for a State revolving fund. This fund would be structured similar to the State infrastructure banks that 39 States have established, using Federal and State money to fund surface transportation projects. We believe that this is another option worthy of consideration.
Thank you, Mr. Chairman. This concludes our oral statement.
Mr. DUNCAN. Thank you very much, Mr. Dillingham.
Next we will go to Mr. Plavin.
Mr. PLAVIN. Good morning, Mr. Chairman, and, members of the committee. Thank you for holding a hearing.
We have a written statement that we would like to submit for the record, if we may. And, also, we have prepared over the last year a document which we call the Economic Impact of U.S. Airports. It is a document that we feel very strongly portrays the issue of what airports do for our economy. We would like to submit that for the record as well.
[The information follows:]
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Mr. PLAVIN. I am the president of the Airports Council-North America. The Airports Council International is a worldwide organization which represents commercial service airports all around the world. The North American unit of ACI is the largest of the worldwide membership around the world, and it is about 150 airport members and about 250 corporate members. We represent about 97 percent of all of the commercial traffic in the U.S. and Canada.
I have with me this morning, Sam Skinner, who is the former Secretary of Transportation, who has agreed to work with us to promote the adequate funding of capital development needs in our Nation's airports; and, also, Todd Hauptli, who is the senior vice president of Federal Affairs at the American Association of Airport Executives.
This survey that I was referring to a moment ago shows that nationwide, airports generate more than $400 billion in economic activity each year. Airports are often the largest employers in their community. They create about 1.6 million jobs directly at airports, another 4.2 million jobs directly related to airports and represent more than $155 billion in salaries and wages. More than $31 billion in taxes are generated for local, State, and Federal Governments.
This stately economic airport impact is why their funding is so critical.
In that vein, thanks for your quick action in passing the legislation to extend the Airport Improvement Program beyond March 31. We hope the Senate will follow your lead. We also commend the leadership of this committee for introducing H.R. 111 to take the Airport and Airway Trust Fund off-budget and assure that revenue collected from air travelers are used for their intended purpose. We share this goal, and we pledge, absolutely, to work with you in that effort. And in that effort, we share your view that there must still be a contribution to the Federal aviation programs from the general fund, in addition to the funds being provided through the trust fund. That will reflect the use of, and the benefits received from, the aviation system by Federal agencies outside aviation and the public, in general. We think that is a very important point.
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This budgetary treatment for the trust fund, in conjunction with eliminating the $3 Federal restriction on local PFC's, which, in turn, would make it possible to shift AIP funds to smaller airports, would comprise a well-rounded approach to funding that benefits airports of all sizes and all air passengers.
And the only small criticism that I have of Mr. Dillingham's comment is the observation that PFC's are a large airport program. I think you will find in talking to smaller airports that they have been able to make good use of PFC's themselves, and that is a very attractive and complementary program for them, even though the dollars may not be very large in the scheme of things.
But the magnitude of the growth we are talking about really does require some action. The 50 percent growth that we are talking about seeing in the system by the year 2007 means that we are going to see 350 million additional entitlements. That will require a capacity equal to the 30 largest airports in the United States; that is 10 new airports the size of O'Hare. That is 20 new airports the size of Minneapolis-St. Paul, and we just really haven't begun to see any of that kind of growth in the system.
And while AIP is critically important, we really need to focus on what AIP does. But increasing AIP funding levels alone, isn't enough to meet the needs of the system. We saw Mr. Dillingham's observations. No one is better able to determine the needs of a local airport than the people in the community that surrounds their local airport—not the Federal Government, not the airlines. It is the management and the local communities that really need to be on the line to decide what they are going to fund and how they are going to fund it.
To the extent that lack of airfield capacity is a constraint on operations, AIP funding can also help enhance competition. That is a serious issue that current airline and airport agreements do not permit. We are not able to fund the kind of enhancements necessary for competition.
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Finally, PFC's are a local charge. They are exercised by local choice. As a Federal grant program, AIP can never fulfill the same role. PFC's which are paid by passengers for specific projects at that airport are an excellent way—sometimes the only way—for airports to fund projects that enhance competition or improve the movement of passengers to and through airports. They give the airport an ability to balance the interests of the various customers—the passengers, cargo and passenger airlines, and the communities.
So, at this point, if I may, I would like to ask Sam Skinner to provide his perspective on airport funding needs and our further proposal for removing the Federal restrictions on PFC's as a way to meet those needs.
Mr. DUNCAN. Thank you very much, Mr. Plavin.
Secretary Skinner.
Mr. SKINNER. Thank you, Chairman Duncan, Congressman Lipinski, Congressmen Oberstar and Costello, and all. I see some new faces and some old faces, but thank you very much, Congressman Oberstar, for your kind comments and all the comments of others.
I have been out of this issue for several years, but now I am back in full force. And, in doing so, I have had the opportunity to review some of the testimony and some of the actions that we took in 1990. And I must say it is very heartening to see the results of the 1990 act that we worked together on a bipartisan basis to pass; it has worked. Many of the things that we predicted would happen, did happen. Capacity needs increased. We spent in 1992 more money for AIP funding than any time—until maybe this year, and this isn't over yet. At the same time, PFC's generated substantial amounts of revenues that enhanced competition, enhanced safety, and decreased delays from one side of this Nation to the other.
I think we are at a pivotal point; it is appropriate to have ''the Year of Aviation.'' I must say, having participated in the bill that you call the ''bill of the century,'' I have mixed bias, because now I would like to see another bill that is going to be the ''bill of the century'' that is going to be better than that one. But that would undercut, I suppose to some degree, the impact of that one. But we did lay a great foundation, and now it is an opportunity to build on that foundation.
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The needs are clear; the $10 billion that Dr. Dillingham has talked about is almost irrefutable. The needs are in all parts of our Nation and in all airports and facilities. The system is working that we put in place in 1990. They have been no abuses of PFC's. We have enhanced competition; we have handled the capacity needs that we had. We have increased safety. The delays at Denver, one of the airports that used PFC's, are some of the lowest in the Nation. They went from the very top to the very bottom in the amount of delays.
I think you do have a unique opportunity to work with both sides of the aisle and the administration in coming up with a solution that will really put into place a foundation for the future.
I don't think—when we talked in 1990 there was an issue on the table that is no longer on the table, and that is the issue of noise. We dealt with that in the 1990 bill, and all of are to congratulated for your outstanding work.
There is another issue we now face, though, and that is the issue of pricing and the issue of, what are we going to do to enhance competition, to create competition so we can get fares, throughout the country, including fares from Albany and other places, at a meaningful rate?
I think if you look at the track record over the last nine years you will see that PFC's and increased AIP funding do more to enhance competition and hold airfares down than anything else you can do.
You can look at the situation in Baltimore. We can now ''surf on the Net'' for airfare prices. And, if you do that on occasion late in the evening, you will see great disparities between pricing. You can go to Washington, D.C.—at any of the airports in Washington, D.C., and Baltimore—for less money from some parts of the country than you have ever been able to do, on an adjusted dollar basis, and that is because, through the use of PFC's at places like Baltimore, airports have been able to control their own destiny, their own gates, built facilities, and encouraged carriers like Southwest and others to come in—carriers that, on their own, could not carry that kind of burden. And, in doing so, they have affected pricing throughout the system. And I think that is the opportunity that exists here.
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AIP funding—we know from experience and from the budgetary processes that we have all been involved in over the years—that AIP funding and Federal budgeting, alone, will not be enough to handle this need. There are just too many. If you had told me in 1991 that we would not spend more money for AIP funding in any year beyond 1992 than we did in 1992, I wouldn't have believed you. I couldn't find that comprehensible; it would be incomprehensible that we would not spent more, but we did. This is the first year that we might be able to break that and, then, by about half a billion dollars if we are lucky.
So, I think it is proved over the last several years that we need to take some steps to let airports control their own destiny. Let them control their own facilities; let the local players determine how they want to enhance that competition and get those fares down. And by lifting the cap on PFC's, you will do so. You will also free up additional money for AIP funding and smaller-and medium-sized airports. And I also would add that, in conjunction with the—I can say this a little more freely than I was able to in 1990—it is time to spend all that money down and get that trust fund off-budget and get that money spent for the benefit of the people that are using it.
And I am delighted that Congressman Shuster, Chairman Shuster, is pushing so hard with Congressman Oberstar on that issue because it is a crucial issue. If we can get that funding in there, we can keep this system going, and we can keep the tremendous safety record, the tremendous meeting the demand on capacity, and, at the same time, protecting the rights of the passengers for lower fares in a comfortable environment. And, I am delighted to be participating with my colleagues here on that very important issue.
Thank you very much.
Mr. DUNCAN. Thank you very much, Secretary Skinner.
Mr. Hauptli.
Mr. HAUPTLI. Thank you, Mr. Chairman. and, Members of the subcommittee.
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I will be brief; I just want to try and punctuate some of the comments made, both by GAO and Mr. Plavin, and Secretary Skinner, who, in my completely unbiased opinion, is probably the finest Secretary of Transportation we have enjoyed in this country.
[Laughter.]
Clearly the best one I have ever worked for.
[Laughter.]
I want to talk about something that you, Mr. Chairman, and other members of the subcommittee have talked about in this room many times, and that is 1 billion passengers within the decade. We are going to see 1 billion passengers in this country in less than a decade. That is extremely important to understand. The magnitude of this is staggering. It is something akin to taking the existing population of the United States and adding that onto an already crowded, already delayed, already congested system. And, unless we do something to meet that growing need, and begin to do something to meet that need now, we are not going to be able to meet the system's needs in the future.
The other day I came up with this sort of tortured analogy. It is not completely worked out, but I wanted to use it on you today. I call it my ''Titanic analogy.'' Now, I haven't figured out who is Leonardo DiCaprio and who is Kate Winslet in this, but I have figured out who the iceberg is. And the iceberg is that billion passengers that is looming out there on the horizon, and we are all on the ship; we are all on the deck, and we are headed straight toward it.
Now the difference is, we are actually on the deck looking at the iceberg; we can see it is coming. And with each day that this industry refuses to deal with it, and, with each day that the Congress fails to deal with it, we get a little closer to the iceberg. And, we have a little less maneuvering room to deal with it. What we need to do is start now. It takes resources; it takes political will, both at the Federal level and at the local level, and it takes time. We have the time, barely. We hope to have the resources, and we need to have the political will to do it.
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That is why the work of this committee this year is so critical on two tracks: Chairman Shuster's effort, and, along with Mr. Oberstar and every member of this committee, on taking the Aviation Trust Funds off-budget and unlocking those resources. But, also, as Mr. Dillingham's presentation has shown in all likelihood, that alone will still not be enough to meet the needs of the system. And, as a result, we believe and suggest that you lift the cap on the passenger facility charge and return the decisionmaking to the local level. Remove Federal restrictions, and the combination of increased passenger facility charge revenues and the increased trust fund revenues in the form of AIP, will be enough to meet the needs of the system. But we have to act, and we can't afford to wait.
And, if I could afford it, Celine Dion would have popped out right then and sung a little of the ''Titanic'' theme song for you, but out of respect for the committee, I won't attempt to do so.
[Laughter.]
Thank you.
Mr. DUNCAN. Thank you very much.
Before we go to questions, Mr. Thune and Mr. Sherwood came in after we had let other members give statements, and I would just like to ask them—Mr. Thune, do you have a statement you wish to make at this time?
Mr. THUNE. Mr. Chairman, I have a statement that I would like to have included for the record. I won't prolong this, but appreciate your calling the hearing today and look forward to this discussion.
Mr. DUNCAN. All right. Thank you very much.
Mr. Sherwood.
Mr. SHERWOOD. Thank you, Chairman. I am very glad to be here, and I am very interested in the small-and medium-sized airports as you fly around the country, and as I fly around the country.
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I mentioned in the rate structure and the fact that, as you say, we have to be working towards the improving of those facilities because they are so important to our economic development. So, I will be very interested to be in the discussion.
Mr. DUNCAN. All right. Thank you very much.
We will go for first questions to Mr. Lipinski.
Mr. LIPINSKI. Thank you very much, Mr. Chairman.
I failed in my opening statement to pay due homage to the greatest Secretary of Transportation——
[Laughter.]
—in the history of the world——
[Laughter.]
—Samuel Knox Skinner, former chairman of the RTA, in the Chicagoland area, former Secretary of Transportation, former Chief of Staff in the White House. And the reason I failed to do so—this is something very interesting about human nature—is that I know Sam Skinner very well. Everything that has been said about him is absolutely true. He has done a magnificent job any place he has gone. But I know Sam Skinner as my personal friend. And when you are as friendly with someone as I am with Sam and he is with me, you oftentimes forget about all their achievements, all their accomplishments, and how successful they have really been. So, Sam, I want to agree with what Oberstar said and what everybody else said here, and I want to add a little bit to it because I agree with them. And I was remise in not making mention of that when I spoke earlier, but I hope I have made up——
[Laughter.]
—for the oversight of my good friend with my statement at the present time.
Now, in regards to the PFC—with you and Mr. Oberstar and Dan Rostenkowski and I were really the spearhead of getting it put in in the first place. In regards to that PFC, do you have—you would like to lift the cap entirely and allow all the airports to charge whatever they want on a PFC? Is that your position?
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Mr. SKINNER. That is our position. I think the time has come, when we passed this—and you are absolutely right. Thank you very much for your kind comments beyond anything I could possibly expect or accept—but you were instrumental in the beginning of the PFC with Congressman Rostenkowski and a number of members. And I think you will remember, Congressman Lipinski, we talked about that this was a new concept, and we wanted to see how it worked. And that was one of the reasons we put the $3 cap in and one of the reasons we put in the restrictions. I think we have now proved that it can work. I think we need to now let airports—they have not abused it. I think that maybe we can tweak it a point or two as we go along, but we now ought to return that power back to the local airport facilities. They are not going to abuse it because if they, in fact, want enhanced competition, their abusing it would cut against that. And I don't know an airport in the country that doesn't—and arguing for more airlines, more competition, and lower prices.
So, I think the time has come; the airports have proved that it can be lifted; yes, sir.
Mr. LIPINSKI. You believed that we should expand what PFC's could possibly be used for?
Mr. SKINNER. I think the program is currently constructed and is working well, and we are not advocating an expansion for beyond its current proposal and its current law. We think it is amply meeting the needs, and there are plenty enough needs on airports to deal with it that we should not allow for their expansion at this point. I think that would be for another Congress and another time.
We need to fill that gap that Dr. Dillingham talked about.
Mr. LIPINSKI. Thank you.
Dr. Dillingham, the Department of Transportation, I understand, at the present time is advocating raising the cap to $4; is that correct?
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Mr. DILLINGHAM. Yes, sir.
Mr. LIPINSKI. And you are also advocating that, if that happens, 100 percent of AIP funding coming to an airport that goes to $4 would be returned to the AIP fund or put into a special fund for medium and smaller airports? Is that correct?
Mr. DILLINGHAM. Yes, sir; with the idea that, in some way, we have to try and maintain the integrity of the whole system, since the PFC would be most useful for large airports. So, therefore, some adjustment to the AIP formula would be necessary to make sure that the smaller airports can meet their funding needs.
Mr. LIPINSKI. In light of the fact that right now the PFC is $3, and 50 percent of the AIP funding is returned to the FAA in order—or the Department, rather—in order to aid and assist the smaller airports, don't you think it would be more equitable if we were to raise the PFC at least to $6? And, then, we can turn back the 50 percent that the big airports are getting at the present time?
Mr. DILLINGHAM. The amount that PFC should be raised is clearly up to the Congress, Mr. Lipinski.
Mr. LIPINSKI. But you are advocating raising it to $4? And that $4 is going to cost the airports 50 percent of their—the remaining 50 percent of their AIP funding? It just seems to me it would be more equitable, if we are going to eliminate AIP funding for the larger airport, if they implement the PFC, that the Department should be advocating going to $6?
You don't want to answer that question?
[Laughter.]
Mr. DILLINGHAM. Not really.
[Laughter.]
Mr. AUSSENDORF. I can just add a clarifying point. The return amount is 50 percent of their entitlement money. Then, the way it is currently structured, if the PFC were to be increased, no more entitlement monies would be returned to smaller airports, unless that 50 percent return amount was increased to 75 or 100 percent. And I think the administration is suggesting that if you raise to $4 or even $5, they would also advocate a 100 percent return for those airports that do impose a $5 PFC.
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Mr. LIPINSKI. Well, I have no problem returning all the AIP funding if the cap would be taken off. So, it would be left up to local airports to determine how much they were going to charge on the PFC or if we passed legislation upping it to at least $6. But I would have reservations about depriving an airport of its AIP money simply because we increased the PFC by $1. But I don't expect an answer, unless you want to answer it.
Mr. DILLINGHAM. No, thank you, sir.
Mr. LIPINSKI. OK.
[Laughter.]
Mr. LIPINSKI. Now you have all talked very much about increasing competition in the aviation industry, and you have talked about PFC's being a way to do this, but one of the greatest ways to increase competition in the aviation industry is by lifting the slot cap on all the slot control airports: Washington National, La Guardia, Kennedy, and the other airport in the city of Chicago—not the one that is in my congressional district, but the other one—O'Hare Airport. Do any of you gentlemen have the courage or the wisdom to want to speak on that particular subject at the present time?
Yes, sir.
Mr. PLAVIN. This is obviously courage, but I am not so sure it is wisdom. Having had some personal experience with airports who are controlled by slots, the one thing I can say, which may not be particularly useful, is that they are all different, that their experiences are different, that their local needs and requirements are different, and each of their airports is different.
It is very clear that slots no longer serve the purpose for which they were originally intended. They were——
Mr. LIPINSKI. You say it is very——
Mr. PLAVIN. —clear that slots no longer serve the purpose for which they were originally intended. They were originally designed to protect the safety of the system, and it is clear at this point that the High Density Rule is unrelated to the protection of safety in the system. The FAA I think will tell you very clearly that air traffic control has managed to figure out a way to deal with the kind of congestion and safety concerns that originally prompted the High Density Rule.
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The second thing that is true is that the rule has within it the ability for FAA, at any time that it wants to, to change the way it is being administered or to eliminate it entirely, now that it is clear that its original purpose is not relevant.
But it is also true that communities have made particular accommodations with their airports over the years, and I think it is really important that as we talk about eliminating the slots, that the needs of the communities are reflected in that decision. And I think that the local communities can speak well for themselves as to the appropriateness or inappropriateness of maintaining the slot rule.
Mr. LIPINSKI. I think there were a great deal of wisdom in your statement. I am not sure there was too much courage in that particular statement but——
[Laughter.]
You mentioned the Department of Transportation. They have the ability to lift the slot right now and everything, but Washington National—or Ronald Reagan Washington National—but they have—who?
[Laughter.]
Ronald Reagan—I voted against it, also, Jim.
[Laughter.]
And the reason I voted against it is because—and I would have voted against for putting him on Mt. Rushmore, also—because I really believe that Ronald Reagan was such a great President he should have his own mountain.
[Laughter.]
You agree with me; right, Sam?
Mr. SKINNER. I do agree with that.
Mr. LIPINSKI. Absolutely.
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[Laughter.]
I knew you would.
[Laughter.]
Mr. SKINNER. On almost everything.
Mr. LIPINSKI. Jim, you will have your opportunity in a minute, please. Now you are disrupting my train of thought, and my number one issue outside of PFC's is lifting the slot cap.
I was going to say the Department of Transportation could lift it every place but—I'll just say—the airport in Washington, and so Jim doesn't get upset, again. But, they have chosen to give us the opportunity to do so because they don't have the courage, quite frankly. But that is something we are going to deal with; that is something that I am obviously advocating by what I have said today.
But is there anybody else on the panel that would like to tackle that issue?
[Laughter.]
Nobody else on the panel?
Mr. SKINNER. I think the purpose of the rule is probably outdated. I think you have got to distinguish Washington National Airport different than any of the others because that was not put in. The capacity has always been there; everybody knew it was there, and there were different reasons for that which were, of course, the growth of Dulles, as well as some of the noise concerns. I think at the other three airports we have better ways of managing capacity and delays than we have had before. I don't think we need to open the door, and I hope the FAA and the DOT will not open the door so significantly that they will create a substantial number of delays because they are getting all kind of pressures on the other side.
No one liked that rule. It was put in place to protect delays and to ensure safety, and it is going to require a lot of discretion and judgment by the FAA if you do give them that authority to make sure we don't get back into the same position we were before, even with the enhanced opportunities.
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And I would only, also, remind everyone that the real way to enhance capacity is through infrastructure improvements where you can make them with new runways, with new taxiways, with new aviation systems like the Four-Post at Dallas/Fort Worth, and things like that. So all of that plays a role in it. It is not a magic bullet to enhance, you know, to change the whole system; it gives them more flexibility that they will have to use.
Mr. LIPINSKI. I think the combination of increased PFC's and lifting the slot cap would enhance competition tremendously in this country. And with all the international flights coming in here, I think that that would help us tremendously, also.
But my time is long past up. I appreciate the chairman's patient indulgence, and I give back the microphone.
Mr. DUNCAN. Thank you very much, Mr. Lipinski.
Mr. Pease.
Mr. PEASE. Thank you, Mr. Chairman, and thank you, to the members of the panel, for being with us today.
Dr. Dillingham, your presentation was very helpful, and the graphics helped summarize it very well. One point that was listed on your last graphic, which I don't think you addressed—and if you did, I am sorry that I missed it; if you didn't, I hope you will—was the last bullet which talked about a privatization pilot.
Can you explain a little more about that point?
Mr. DILLINGHAM. Yes, sir.
It is one of the initiatives that FAA has put in place. And right now, I think we have two airports who have expressed an interest in privatization. So, there hasn't been a strong push towards privatization.
Mr. PEASE. Privatization in airport management or——
Mr. DILLINGHAM. We already have a lot of privatization in terms of concessions and things of that nature, but in this case, we are talking about airport ownership.
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Mr. PEASE. Such as Indianapolis, which is a BAA project.
Mr. DILLINGHAM. Right; but Indianapolis is sort of a management situation——
Mr. PEASE. That is right.
Mr. DILLINGHAM. —as opposed to an ownership situation.
Mr. PEASE. That is right. You are talking about privatization of ownership, not of management of the facility?
Mr. DILLINGHAM. Yes.
Mr. PEASE. OK. And you have a report—do you have material to share with us on that, or are you just saying that there is not much interest in it at this point?
Mr. DILLINGHAM. Well, we have a report that we did on privatization which we would be pleased to supply to you at this point. But, other than the fact that there are only two airports that have expressed an interest recently, that is all the information that we have right now.
Mr. PEASE. OK; all right. Thank you.
Mr. DILLINGHAM. Sure.
Mr. PEASE. I would also like to ask you, Dr. Dillingham, if your projection of need in the future assumes the current air traffic control system, or does it adjust for improvements in that system when you project additional capacity needs?
Mr. DILLINGHAM. It does not include ATC modernization nor does it include airport runway improvement and enhancement for the most part. We just issued another report that suggests that there will be substantial costs involved with maintaining the runway infrastructure as well, so that the need that we show doesn't contain all of the possible needs.
Mr. PEASE. I don't know if you are the one I should address this to or others on the panel, but if anybody would wish to address it, I would appreciate it. And that is, how the need for additional capacity might be affected by improvements in the air traffic control system, or do we have any projections in that regard?
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Mr. PLAVIN. When we put the study together about two years ago now, we looked at what the airports had actually planned over the next five years, as to programs that were going to go into the pipeline, so that the number actually is generated from looking at a six-year total, actually, which totalled $60 billion, and that, hence, the $10 billion annual number.
But I think it is fair to say that given the timeline that it takes to do major projects, the kinds of things that airports will need to have in place, if we really do improve the effective capacity airports, are probably beyond that period. And so Mr. Dillingham is quite right to say that it does not now reflect the impact of the kind of growth that we expect to be coming at us over the next 5 to 10 years.
The air traffic control system's improvements may very well bring more planes to the threshold of the airports. More people closer together will mean that you will have to handle more airplanes on the ground in a shorter period of time. And one of the things that I think is important for us to convey is that the implication of that is likely to be on the terminal and landside rather than on the airside, because you will have more people trying to come through the terminals in a much shorter period of time and, hence, the need for improved ticketing, baggage claim, passenger holdings, gates, and access roads to and around the airport. That is one of the reasons, by the way, why more than what you would expect to find in PFC money has been spent on terminal and landside improvements, because we are already seeing the impact of larger planes and more frequent takeoffs and landings.
Mr. PEASE. OK. Thank you very much.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Mr. Pease.
We have now been joined by our outstanding chairman of the full committee, Chairman Shuster, and I would like—before we go further with questioning—I would like to call on Chairman Shuster for any statement or comments that he wishes to make.
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Mr. SHUSTER. Well thank you, Mr. Chairman. I really have two things to say.
The first is to congratulate you and the ranking minority member, as well as my colleague, Mr. Oberstar, for these hearings, because I think it is very important that we move this year to not only streamline, modernize, FAA, but also unlock the Aviation Trust Fund for the good of the traveling public.
Second thing, I am pleased to announce that this morning I just finished a press conference where I announced the introduction of my Aviation Passenger Bill of Rights, which I think is long overdue. And, indeed, I am sure many of you are well aware of the horror stories we have heard. Of course the worst recently was the Northwest problem in Detroit, where people were virtually held prisoners in an airplane for 12 hours. They had no right to return to the terminal, no right to get a refund, and no right to move to another airline. And, indeed, over that period, there were over 5,000 passengers who found themselves on the runway as virtual prisoners for up to 8 hours.
The interesting thing to me is that once some of my colleagues heard that I was introducing this legislation, it has struck a raw nerve. I can't walk on the floor of the House or go to the House gym without members coming up to me and telling me horror stories that they have experienced or that their constituents have experienced. And so, the 10-point passenger bill of rights deals with several things, one of which is requiring the airlines to pay compensation to passengers if they are kept waiting on the runway for more than two hours. If delays are attributable to air traffic control, of course, they wouldn't be required to do that.
I am deeply concerned that, for example, DOT tells us there was a 26 percent increase in passenger complaints this past year and yet that need not be the case. Southwest Airlines is doing a superb job.
For 100,000 boardings, Southwest Airlines has a complaint of 0.25, and yet most of the major airlines have passenger complaints which are four times greater than the complaints filed by Southwest Airlines. It is just totally unacceptable. Continental, American, United, TWA, America West, and Northwest all have passenger complaint rates which are greater than four times the passenger complaint rate of Southwest Airlines.
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So, I would invite my colleagues to look at this legislation and co-sponsor it if you are so-inclined.
I also want to commend United Airlines, who I understand that they are instituting a voluntary policy of returning the aircraft to the gate if that aircraft is held out on the tarmac for a substantial period of time.
So, I think there are some bright spots here of some of the airlines responding in a positive way, and I would hope all of the airlines would be inclined to do this. Goodness knows, I don't want to see re-regulation of the airlines, but that is what we are going to get if we continue to have the passenger complaints. On my way over to the press gallery, two members stopped me this morning to tell me their horror stories. And, indeed, if Members of Congress are being treated this way, what is happening to the general public? It is just wrong; I think we have got to address it. We have a duty to address it. And I have conferred with Chairman Duncan and staff, and it is my hope that we will hold hearings late this month or early next month and get it through subcommittee and full committee in March and get something to the floor quickly so that we can address an issue which is on the minds of millions of Americans.
Thank you.
Mr. DUNCAN. Thank you very much, Chairman Shuster.
Then we will go next to Mr. Oberstar.
Mr. OBERSTAR. Thank you very much, Mr. Chairman. And I commend the Chairman Shuster on introducing the legislation. It is certainly going to get the full-time attention of the airline community.
[Laughter.]
Conservatively so.
Mr. Dillingham, the testimony that you have prepared on behalf of GAO says, quote, ''under current formulas, increasing AIP funding would help small airports more than large airports. Raising PFC's helps larger airports more.'' Does that suggest the GAO is for both increasing AIP and PFC?
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Mr. DILLINGHAM. What we meant to suggest——
Mr. OBERSTAR. Or do you take a position on whether either——
[Laughter.]
—should be done?
Mr. DILLINGHAM. Mr. Oberstar, what we are trying to suggest is that we are trying to look at the total aviation system and realizing that PFC's will, in fact, be more useful for larger airports than for smaller airports. But smaller airports depend more on AIP funds than do larger airports. So I guess the bottom line is that a mix is what the Congress may want to consider, if we want to make sure that all airports of all sizes are taken care of.
Mr. OBERSTAR. And the amount is up for Congress to decide, but you are suggesting—the conclusion of your analysis is that both are needed?
Mr. DILLINGHAM. Yes, sir.
Mr. OBERSTAR. Now, you also say most AIP funding goes for airside projects while PFC is generally landside. We know that; I am disappointed in that, frankly. I would have preferred and intended that a preponderance of the PFC money go to airside improvements and expansion, and that was our intention when we crafted that legislation in the first place. I don't deny the need for landside improvements, and they are necessary because the airlines, frankly, don't pay a whole lot of attention to the needs of their passengers. They are all stuck at the security entrance or in the parking lots. Airplanes take off, and they have generally resisted landside improvements to move passengers more readily to the gates. However, are airports ensuring that airside needs are being fully supportive before committing to the landside needs?
Mr. DILLINGHAM. I think airports would argue that, yes, that is the case. There have been some anecdotal stories, particularly out of JFK, that suggest that that may not be the case, but we have not done a full analysis of that question.
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Mr. OBERSTAR. All right. Well, I may want to strengthen the language to require assurance that airside needs are being fully addressed.
Now from FAA data that I have reviewed, along with our staff, payment of interest on bonds represents 28 percent of the approved PFC. That seems like a very high percentage. Have you analyzed that aspect of the PFC? And, do you have observations for us on that question?
Mr. DILLINGHAM. With your permission, Mr. Oberstar, I would like Mr. Aussendorf to answer that. He has done quite a bit of detailed study in that area.
Mr. AUSSENDORF. Thank you. Well, perhaps not enough to answer your question, though.
[Laughter.]
The PFC's are eligible to be used for interest payment on bonds which may be used for airside improvements or landside improvements. And it is difficult within the data that we have to discern the split between that. Otherwise, the emphasis is a little bit more on landside than airside for the remainder of the PFC monies that are used.
But it is really important for airports to undertake large projects, to be able to finance their bonds with PFC collections. Otherwise, the projects would have to be deferred until they collected enough PFC money along the way to get the project underway. So, bonding is—as we saw with some of our graphics earlier—very important, especially for larger airports to get projects started.
Mr. OBERSTAR. Mr. Plavin, would you respond to that issue?
Mr. PLAVIN. Thank you, Mr. Oberstar. I think there are two answers to the question.
One of them is—it is hard to say this and convey the full meaning of it, but PFC's are really just one of a number of funding sources. And we have to keep that in mind as we look at the $7 billion that Dr. Dillingham was talking about, where the bulk of it comes from bonds that are issued by the airlines. But, the choices that get made at an airport are made together with their communities of airlines and other tenants, and they decide which is in the mutual interest of the group as to which funding source is going to be used for which peculiar need. And every airport is different. And it is not at all a question of deciding, we have to use PFC's for this, or we have to use it for that. Rather, it is a decision which says, ''this is the best combination of sources that we can apply to an issue.'' In fact, 20 percent of PFC's, plus whatever interest associated with those projects, have been used for airside projects. And as we have been talking about when gates are so critical to an airport, we haven't classified gates as an airside improvement, and, yet, in many ways the gates are the critical link in the question about whether you can accommodate aircraft timely and safely and reduce congestion.
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So, I think that this is a good record. I think that the airports have done well, and I think Congress has done particularly well in establishing this array of funding sources for the array of airports and the array of funding needs.
Mr. OBERSTAR. Thank you very much.
Mr. Chairman, I have just one further question for Secretary Skinner.
I think one of the great successes of this decade has been the reduction in airport noise. When we began this journey in 1990, there were 7.5 million people exposed to unacceptable levels of noise. And through our legislation of our 1990, by the end of this 600,000, or fewer than 600,000 people, exposed to unacceptable levels. And by the end of 2000, that should be down to just tens of thousands, or even fewer. And we thank you for your participation with us in that notable accomplishment.
And the question I have is that you have stressed, and we stressed in 1990, that the PFC would enhance competition. The key feature of that legislation. With you sitting there at——
[Laughter.]
—that table that I offered was ability to build gates without opposition.
Mr. SKINNER. Right.
Mr. OBERSTAR. Without a veto by the airlines. What has been the principal contribution to competition of the PFC? Has it been gates?
Mr. SKINNER. Well——
Mr. OBERSTAR. Has it been other——
Mr. SKINNER. No; I think just the ability to build gates.
I would also say that, listening to Chairman Shuster's comments on the Passengers' bill of rights, if we are going to move those people back to the gates, we have got to have gates to move them back to. One of the problems that people are kept out on the apron is there is just a lack of—we have seen it at Reagan Washington National and all the other airports. So, therefore, when we talk about airside improvements, and gates being part of airside improvements, if we have additional funding, we will be able to have those additional gates available for those passengers to come back to. And I think that is an inhibiting factor in many places.
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And I think the real key is, a number of the new-start airlines cannot afford to put on their balance sheet the financing that is necessary to build those facilities. If, in fact, airports can control it by building it on their own with their own financing and then control the access to those gates with either shorter long-term leases, they have the ability to make those gates available. They may be able to make them available in case of an emergency when someone has to come back, and they can switch them over, and they can make that a determinant that it is not your date, exclusively. If an United flight is sitting there and these passengers need to come back, the airport can have it in the lease that if there is an empty Continental gate, they can go back and use it. You can't do that when the airlines control those facilities completely.
So I think we have got to get autonomy and freedom in the control of those facilities if you are going to fully use them in enhanced competition.
And I am on the board of a very small airline out of Milwaukee, Midwest Express, and, in many respects, if we had to pay for our own gates, we couldn't do that and put them on our balance sheet. It isn't big enough yet, you know—that airline is very highly ranked in the small market that it serves.
Mr. OBERSTAR. Thank you very much.
And that key point about airports controlling the gate, not having airlines be the owners, I think we need that flexibility in the portfolio of airports to enhance competition. That is very, very critical.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Mr. Oberstar.
Mr. SKINNER. And the only way to do that, if I might, is to give them—is a PFC or a local funded charged. The AIP funding, as currently structured, can't provide that. So, you are going to have to do it either by letting the airline control it or letting the airport and airport authorities control it.
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Mr. DUNCAN. Thank you.
Dr. Dillingham, let me ask you this; the Air Transport Association estimated in 1997 that delays cost the airlines at least $2.4 billion. In your study of all these issues and problems, do you think that most of these delays are caused by problems in the air traffic control system or by lack of airport capacity, or both? Is it half and half, or is it more one than the other?
Mr. DILLINGHAM. Mr. Chairman, from the work that we have done, it looks like a combination of things. It is both the air traffic control capabilities as well as the capacities at the airports.
And I would just like to reiterate something that one of the other panel members said, that when we move towards modernizing air traffic control, it is going to move planes to the terminals faster, and that is, in fact, where we are going to see the congestion if we do get the air traffic control system modernized.
Mr. DUNCAN. Anybody else want to make a comment on that?
We, obviously, could save billions of dollars over the next several years if we can improve on that delay situation.
In your study of the PFC's, Dr. Dillingham, did you find that this money was being spent wisely, or did you find some examples of wasteful spending? Or, are most of the airports making good use of the PFC money?
Mr. DILLINGHAM. I guess it depends on who you asked, and since you are asking, I still have to find a way to answer that. Of course, AIP has more conditions and restrictions on how it is spent. And the PFC doesn't have those same kinds of restrictions. In the case of PFC's, it is, oftentimes, the airport that controls the money as opposed to airlines.
We don't have any examples where something illegal was done. We have heard anecdotal stories where PFC funds were spent on projects which the airlines did not agree were the highest priority projects—and they argued in one case that some safety and security projects were not done, but should have been done instead of spending the PFCs on a landside project.
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Mr. HAUPTLI. Mr. Duncan, if I could just add a quick point to that.
Mr. DUNCAN. Sure.
Mr. HAUPTLI. One of the benefits of PFC's is that the money—because of the way Congress set up the law in 1990—stays within the aviation system, as opposed to the aviation excise taxes which, until later this year when we unlock those trust funds revenues, come to Washington and sometimes don't get spent on aviation-related projects.
Mr. DUNCAN. Right.
Mr. HAUPTLI. PFC revenue, collected locally and imposed locally, spent locally, and stays within the aviation system doesn't come to Washington, doesn't sit unspent, in a trust fund.
Mr. DUNCAN. Well, that leads into my next question, Mr. Hauptli. If Chairman Shuster is successful in the effort that he is leading to unlock the Aviation Trust Fund, would that, in your opinion, be sufficient to make up the funding gap in airport infrastructure needs? Or, would you still see a need to increase the PFC's? And, if so, why?
Mr. HAUPTLI. Well, I would never bet against the chairman of this committee on anything, Mr. Duncan, but the answer, I think is that, it may be too soon to tell. As the GAO presentation demonstrated, there is a significant gap. The existing NPIAS shows $6 billion a year in AIP-eligible projects. I think we may see that figure grow as the administration releases its next NPIAS. We are spending $2 billion a year now. There is a big difference between $2 billion and $6 billion a year.
If Chairman Shuster and this committee is able to unlock the trust funds in a way that can double or even triple the program, then probably not. We probably wouldn't need the PFC increase. However, if history is a guide, something short of full unlocking of the trust funds, or taking the trust funds off-budget, may occur—some sort of a firewall protecting aviation funding. That may mean that a PFC increase is necessary as well to meet the needs of the system.
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Mr. PLAVIN. Mr. Duncan, if I could add to that.
Mr. DUNCAN. Yes, sir; Mr. Plavin.
Mr. PLAVIN. One of the concerns that we have been facing, not with the issue of taking the trust funds off the budget, but with the question of how the money in the trust fund is used, is that airports wind up being at the low end of totem pole. If you saw the President's budget, what has happened is that, even within the dollars available, the FAA essentially said, ''We want them, and we want to take them for ourselves. We are going to leave you with less in AIP than what you had anticipated.'' So, I have a concern that over the long run, the airports are going to get squeezed out of that program unless we do something serious to, not only to protect what is in the program, but also to keep the general fund contribution. So, I think that is a real issue.
But the second thing is, the way AIP is now structured, the way it is in law and the way it is in regulation, the priorities that are being established for the use of AIP are different from the priorities that airports—especially at the larger end of the spectrum—may experience. It is quite properly focused on safety and security and capacity on the airside, whereas, as you have heard today, many of the concerns are in other parts of the airport that have to happen at the same time.
So, I don't think there is any question, but that we are absolutely 100 percent in support of the notion of freeing up the trust fund, but I don't think these are mutually exclusive. I really believe very strongly we have to do both.
Mr. DUNCAN. Well, in that same vein, Secretary Skinner, you were the main one in the administration involved with the original startup of the PFC program. Were PFC's intended to replace the Airport Improvement Program funding or as a supplement, or what was the original intention there?
Mr. SKINNER. Well, we had a growth that has materialized by the way. We predicted that growth would be about 60 percent over period 1990 until today, and that is about what has occurred. The needs of the available funding were not there because we weren't able to get the trust fund off-budget, and there were no signs that it could get off-budget. And, therefore, the needs just were clearly greater than any AIP funding level that we had ever had, including the level of 1.9 in 1992 which was the highest that we had ever had. So that is the reason we put PFC's and the needs, also, to go landside on things that affect competition and make facilities more accessible.
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I also think that—there is a big debate that once you go off-budget, a big debate will occur as to what portion of those funds are going to be spent towards operations and, you know, are we going to cover with those trust funds Government operations? We used to argue that there was about 20 percent. I know Mr. Shuster would have a better feel on it than I do, or Congressman Lipinski. We used to argue there was 20-some percent of the use of the national aviation and air space system was non-commercial; it was Government and those factors. And who is going to deal with that?
So, once you release it, you have also got to protect it, and you have also got to make sure you have got a general revenue source in there to take care of those truly Government functions that the Government should pay for. And PFC's allowed you to have the flexibility and not to have that interfered with and not have that touched or subject to annual review. I mean the AIP thing has gone up and down over the last several years. There is no certainty if you are an airport manager or an airport developer that you are going to have that source of revenue.
Mr. SHUSTER. Would the gentleman yield?
Mr. DUNCAN. Yes, Mr. Chairman.
Mr. SHUSTER. Secretary Skinner is absolutely correct. And, indeed, it would be a Pyrrhic victory if we were to unlock the Aviation Trust Fund and then find out that the price we had to pay for it would be a reduction in the general fund support, which would be totally unacceptable, because, indeed, somewhere between 22 to 25 percent of the cost is, indeed, related to national defense and other non-commercial uses.
Good point.
Mr. HAUPTLI. Mr. Duncan, if I could just make one quick point to follow on what Secretary Skinner said.
In 1990, part of the original deal was the AIP program would be at least $2 billion a year, and the PFC's were meant as a supplemental form of funding. This administration has proposed over the past several years to reduce AIP funding rather substantially, and in its budget of this year with the PFC increase that they propose, which we welcome, they are talking about essentially substituting PFC funds for AIP, which is not welcome.
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Mr. DUNCAN. All right. Thank you very much.
Mr. Traficant.
Mr. TRAFICANT. Thank you, Mr. Chairman. And I want to congratulate you and Mr. Lipinski for your bipartisan efforts. This committee should serve as a model for all committees in the Congress.
Also, I want to congratulate the chairman on the new of bill of rights. If I am not on it before you leave, put me down on it.
[Laughter.]
I would like to address the group just briefly and make a statement. That trust fund is there generated from the flying public. It should be released, taken out from under budget, and freed up for the use of such purposes.
But my concern, as it has been with many of the committees in Congress, is focused upon safety. And many of the most serious tragedies involve controlled flights into terrain. Planes miss runways. Sometimes we are slow getting behind the technology curve, but there have been develops through the private sector, through research and development, enhanced vision technologies. One of them is the new laser vision visual guidance system, as well as certain other systems. But those systems that are cost effective, inexpensive to provide, place a plane at approximately the exact same spot on a runway every time through every test that has been done.
I was able to attach an amendment to the reauthorization bill last year, and as this thing died in the Senate—not the amendment, but nearly everything because they didn't get it out, and we are working on a six-month temporary. But what I can't understand is why the FAA hasn't vigorously, themselves, without the urging of the Congress, moved in that direction.
I think it is a ''non-brainer,'' specifically for helicopters, with some of the problems we are having there. I think somebody—as the chairman, Mr. Duncan, and I did—should have to go out and take a flight in it. We were involved in a flight with a very, very unusual circumstance—heavy fog, vision very limited—and we come right in. Once you lock in on that laser, and you are right in there, and you land that plane.
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So, I think the point that I am making is this: Number one, I want the FAA, rather than just wait another year for another headline tragedy, to go out and take a look at that, all of that different technology. And I want the support of the FAA to do two things. My bill would call for mandating over a 10-year period the installation of these systems, but at best, I think at least what we could do, is we could allow the use of AIP monies to be used for such technology if these airports so choose to do so.
So with that, the question I have of the administrator is simply this—and we all think you are doing a good job; we appreciate the job you are doing. Really; things have gone smoothly; we have a good relationship, and we want to thank you for that. But I want to know why, when it comes to lives, we seem to be the last group to someway certify some safety provisions? Mr. Secretary?
Mr. SKINNER. Well——
[Laughter.]
I see in the next day of hearings, you are going to have an opportunity to talk to the FAA administrator, Jane Garvey, and I am sure she will be ready to answer that question. I did ask my good friend—as you know, I do fly as Phil Boyer does. And AOPA believes that it is a technology that has a lot of promise, and any time you have technology that has a lot of promise, everybody ought to be looking at it and how it can be deployed. And so I think it sounds to me like it might not be for everything in every situation, but it is clearly something has opportunities that ought to be explored. And I am sure you are going to make your point clearly and concisely to Administrator Garvey, and I will give her a ''heads up'' that it is coming so that she will be prepared for you.
Mr. TRAFICANT. Well, we also wanted to let you know——
[Laughter.]
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—that in the umbrella of transportation, we believe it is very important. And for some reason, it has not gotten the type of attention I believe it should have had.
Mr. SKINNER. I will talk to Secretary Slater and tell him as well.
Mr. TRAFICANT. With that, I want to thank you, Mr. Chairman, for having the hearings.
I yield back my time.
Mr. DUNCAN. Thank you very much, Mr. Traficant.
Mr. Lampson.
Mr. LAMPSON. Mr. Chairman, I have no questions right now. Thank you.
Mr. DUNCAN. Mr. Rahall.
Mr. RAHALL. Thank you, Mr. Chairman.
Mr. Secretary, you touched upon this in your statement, but I am interested in how lifting the current $3 PFC threshold would help non-hub airports.
Mr. SKINNER. The primary ability is for—it is going to free up AIP funding. Under the formula—and I think as you look at how you make that movement—you are going to look at the flexibility it will give. But the idea is to shift the available funding of AIP funding from the larger airports—and they have been willing to give this up, and they participated in 1990, and I think they would this time—shift that funding to these others airports that can't generate revenues from PFC's but need more AIP funding.
We are in a battle for limited resources and, you know, 50 cents of every dollar that is generated in large airports frees up AIP funding for smaller airports. And I think the proposal is that that continue to be examined so that more AIP funding can flow down to the smaller non-hub airports.
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Mr. HAUPTLI. Mr. Rahall——
Mr. RAHALL. Yes.
Mr. HAUPTLI. If I could just follow up briefly on that.
In addition to what Secretary Skinner has said, one fact that surprises a lot of people is there are a number of smaller airports that you wouldn't automatically sort of consider to be using PFC's that do. In the State of West Virginia, to pick a totally random State——
[Laughter.]
—there are five airports that have passenger facility charge programs in place: Charleston, Clarksburg, Huntington, Morgantown, and Parkersburg. And those are facilities that you wouldn't automatically think would have PFC's in place. But those, the PFC revenue that comes to those airports is a critical component of their development program.
So, in addition, to more AIP money being available to the smaller airports through a PFC increase, the smaller airports, essentially, get to ''have their cake and eat it, too,'' more AIP money through a PFC increase and additional PFC revenues.
Mr. RAHALL. And so when they charge a PFC, they are still eligible to draw from AIP up to what? Fifty percent?
Mr. PLAVIN. No; as a matter of fact, with the smaller airports, they are not required to return any of their entitlement funds. And Congress recognized that when the original bill was enacted, that only the large-and medium-sized airports would have to return portions of their AIP entitlement funds.
So, the good news is for smaller airports that, even if it doesn't appear to be a very large amount of money, you still have money that can be used for fencing, for a firetruck, for something that doesn't, in itself, appear the same magnitude as a terminal or runway. But, also—and this is the other thing that I think is really important—a lot of smaller airports are using PFC's as their local match. As you know, AIP requires at least a 10 percent match on the part of airports, and many of the smaller airports have used the local PFC to generate the match to provide that funding for AIP.
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Mr. RAHALL. Thank you.
Mr. SKINNER. And, also, it serves as a source for funding for regional airports. And as you know, a number of regions are interested in regional airports, including one not too far from here—a little bit west of here. So, it could be provided as that source of funding as well.
Mr. RAHALL. Thank you. Thank you, gentleman.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Mr. Rahall.
Just out of interest I might mention that the current definition of a medium-sized airport is one with 1.6 million enplanements or above. So that is where the current cut-off is.
Mr. Hauptli, of the airports that are eligible to impose PFC's at this time, how many do so? All of them? Or, at what percentage?
Mr. HAUPTLI. 302 airports currently are approved to collect PFCs. And that is out of a universe of about 500 airports that could impose one.
Mr. DUNCAN. And I noticed in Dr. Dillingham's chart that your current estimate of how much a dollar increase in the PFC would raise is about $500 million a year roughly?
Mr. HAUPTLI. And I think the administration believes that to be around $400 million——
Mr. DUNCAN. Four hundred million?
Mr. HAUPTLI. —in their presentation.
Mr. DUNCAN. All right. Do you have any other questions?
Well, thank you very much. This has been a very helpful panel, and we will proceed now to panel number two.
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Thank you very much.
Mr. SKINNER. Chairman, I just would say that your piece of paper, a summary that you handed out, this memorandum that was prepared by your staff—I just happened to look at the whole thing; it is an excellent piece of work, and your staff should be congratulated for that.
Mr. DUNCAN. They do a great job.
Mr. SKINNER. I know somebody worked hard and long on it, and it is well done.
Mr. DUNCAN. Well, thank you very much, Mr. Secretary.
Mr. Lipinski has suggested that probably we should go cast this vote, and then we will start with panel 2. So we will be in a brief recess while we go to the floor to cast this vote.
Thank you very much.
[Recess.]
Mr. DUNCAN. We'll call the hearing back to order.
At this time I'd like to once again call panel two forward. The second panel consists of Mr. Phil Boyer, who is president of the Aircraft Owners and Pilots Association Legislative Action; Mr. Edward M. Bolen, who is the president of the General Aviation Manufacturers Association; the Honorable James K. Coyne, who is president of the National Air Transportation Association; and Mr. Ken Button, who is professor of public policy at The Institute of Public Policy at George Mason University.
So, gentlemen, welcome to our hearing today. Thank you for coming. And as I've stated in here many times, we always proceed with the witnesses in the order listed on the call for the hearing. And that means, Mr. Boyer, we'll start with you. And, Mr. Bolen, we'll come to you next. Mr. Boyer.
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TESTIMONY OF PHIL BOYER, PRESIDENT, AIRCRAFT OWNERS AND PILOTS ASSOCIATION LEGISLATIVE ACTION;EDWARD M. BOLEN, PRESIDENT, GENERAL AVIATION MANUFACTURERS ASSOCIATION; JAMES K. COYNE, PRESIDENT, NATIONAL AIR TRANSPORTATION ASSOCIATION; AND KEN BUTTON, PROFESSOR OF PUBLIC POLICY, THE INSTITUTE OF PUBLIC POLICY, GEORGE MASON UNIVERSITY.
Mr. BOYER. Thank you, Mr. Chairman. And good morning. As you said, I am the president of the Aircraft Owners and Pilots Association. You probably wonder what I'm doing here then, at an airports discussion. I guess a line from my predecessor is a good one to talk about: ''We've never left one up there yet in the air, and so therefore we try to come down as many times as possible at one of our Nation's airports.''
I guess the thing I would like you to do because it's been a very interesting panel that started, is now to shift from thinking big to thinking very, very small. Those mile-spaced runways in the Far East that Mr. Oberstar talked about: Consider the taxiway that connects the two of them, cause that's all my members in the general aviation community need to have to participate in the air transportation system.
We never thought, I might add, that PFC's were any concern of ours, but after the fine presentation by the GAO, we may now weigh in on that fray and try to change the formula so perhaps some of that funding, or more of that funding, could hit these small airports. We want to emphasize that our interest is really in the small and remote airports, those reliever airports that flank our large cities.
But what's really disturbing is that public-use airports in this country for general aviation, we're losing about one every week, and that number is climbing. In 1996, 70 airports were lost, 1997 about the same number, and we're just waiting for the final figure in 1998. But it looks like more than one airport.
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Now you'd say well those are so far out they don't really matter, but, in many respects, these are reliever airports that actually provide the traffic relief from the airports that the gentlemen were talking about before me on the panel this today. This is one of the reasons that our members have said to our association and others, this is our No. 1 concern, please work more on airports, on improving those we have, and on making sure we don't lose anymore.
We've undertaken a substantial effort at AOPA in this regard. Part of our effort involves producing a videotape that, by the way, we will be sending to each and every member of the committee. Mr. Chairman, I know you've already been given one.
I might add that at the end of this year, we sent 9,000 of these 26-minute tapes—not to our members, cause this tape is designed for those officials, those members of the public that are concerned with airports. We sent 9,000 to all the mayors in this country, all the county executives, all of the state legislators who are in positions like yours who make decisions on airports, to all of the chambers of commerce across the United States. And, with your permission, I'd like to play just a short excerpt that illustrates some of the numbers about the airports.
Mr. DUNCAN. Go right ahead.
[Videotape is played.]
Mr. BOYER. And Congressman Lipinski, as you well know, Schaumburg is in the shadow of that other airport in Chicago. Just six miles away, as a matter of fact. And yet here is the village, the top official in the village, saying how important the small general-aviation airport is to their economy there in that village.
We're not going to talk about money. What we're really concerned about retrieving some of these things that were in last year's bill that you, Mr. Chairman, and the committee put in that help us protect these airports. We believe that the approach you took last year that never went into law, hopefully will resurrect itself this year as we look at a reauthorization proposal.
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First of all, some of these airports are being closed because there is no public-notice period, there is no chance for people to weigh in on the value of that airport. And therefore we hope you'll put in again that provision that calls for public notice.
The subcommittee also directed, at one time, the General Accounting Office—the same people you heard for on the first panel—to look at the grant-assurance program of the FAA. And they will be reporting back to you, the subcommittee, on that sometime early in the spring. We were very pleased to work with this group.
You should take—I know it's a state or a local issue—but you should take a look at how the zoning requirements are applied to airports. The FAA is only required, right now, to, that the sponsor have the enabling state and local zoning ordinance right up to the edge of the airport property. Well, as you know from the discussions of noise and the mitigation techniques, that it's far beyond the airport property that we have problems. Therefore, we applaud a state like California that has an airport land-use commission law, which requires that communities also go to another agency, no matter whether they cross county, city, or cross-county lines, before they can take action on airport so the zoning is proper.
We spend so much money from the trust fund already and from the AIP numbers to mitigate noise, and it's wonderful what we've done such, but at the same time, had these been properly zoned in the first place, would we have to have spent that money.
Yes, 1999, Chairman Shuster has declared as the year of aviation. I would claim that we're not going into the year of aviation in real great shape. We have a six-month reauthorization. AIP's at $1.1 billion at the moment. The administration's proposed a Fiscal Year 2000 budget of $1.6 billion. We have lots of work to catch up. AOPA is in total support of moving the trust fund money and unlocking it so that we can get our hands on it for airport finance, modernization, and others. And we hope that you will continue your vigil against what is in, of course, the administration's budget for next: User fees for aviation and using that money for other purposes.
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Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you very much, Mr. Boyer. And next we will hear from Mr. Bolen.
Mr. BOLEN. Thank you, Mr. Chairman.
Mr. Chairman, since the U.S. Congress, with the leadership of this particular committee, passed the General Aviation Revitalization Act, the general aviation industry has undergone tremendous growth. Tonight at a press conference, I'm going to announce that last year the industry set a new, all-time record for billings. And for the first time since 1985, we shipped over 2,000 aircraft in a single year.
Perhaps most importantly, last year industry employment in the manufacturing sector grew by 11.5 percent. These are good jobs, good manufacturing jobs—high skill, high wage, growth-oriented jobs that we can keep here in the United States.
Being able to shift our focus from the courtroom to the marketplace has allowed manufacturers to work on innovations, to bring out new aircraft and new engines and new avionics. And these advancements are really improving on the quality of the aircraft, the speed of the aircraft, the comfort, and the affordability. We're really doing terrific things, and the benefits are being enjoyed nationwide. We are without a doubt the world leader in general aviation.
But in order for us to keep that position, we're going to have to make investments. We're going to have to invest in our airports. I'm very concerned about the closures that Phil Boyer has talked about. We've got to stop those. We've got to begin enhancing the airports that we currently have, and I think Jim Coyne will touch on that.
We need to invest in modernizing our airspace system, deploy WAAS, and try to begin enjoying the benefits that are incumbent upon a new, modern system. And we've got to invest in our FAA. The FAA is, without a doubt, the world's best aviation authority, but we need to make sure they have the resources they need.
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All of this investment, I recognize, has got to come from some place, and I think the answer lies in making sure the revenues that are generated from the aviation industry are used solely for aviation purposes. We cannot use that money to mask the deficit or to fund other programs. We also need to make sure that we continue the current policy of using the general-fund contribution to cover the FAA's cost of safety, certification, and regulatory operations.
I hope that the committee will move forward on promoting these things. We hope that the committee will reject the administration's proposal for user fees. Over the past several years, I've been in front of this committee several times talking about the problems user fees have created in foreign countries. They've been very detrimental to general aviation, and I would hope, as the world leader in aviation, we don't try to copy a failed system that has been put in place by some of our competitors.
I also hope that this committee will reject the proposal for a performance-based organization. In my opinion, the PBO is really nothing more than a political solution to what is inherently a technical problem. Increasing airport and airspace capacity is not about organizational charts. It is about moving forward on modernization. And I recognize that this committee has understood that. I hope we'll move forward on that.
I've prepared written remarks, and I would like to submit those to the record. And I think I'll conclude my verbal statement at this time.
Thank you, Mr. Chairman.
Mr. DUNCAN. All right. Thank you very much, Mr. Bolen. And we will put your full statement in the record.
Mr. Coyne.
Mr. COYNE. Well, thank you very much, Mr. Chairman. I also have a written statement that I would like to put in the record. And in addition, I've provided for each of the members a copy of our American Aviation Access Initiative. I'll be talking about this in a little bit of detail, but first I'd like to congratulate the committee on the role that it has played recently and throughout its history in advancing transportation in America.
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When you think back on the history of this country, you can't help but appreciate the dramatic role that investments in infrastructure have made in changing the very face of America: Going back 200 years ago, when our Congress first invested in seaboard ports, and, a generation or two later, when we built the railroad structure across the country through the efforts of our Congress and Federal Government. And of course more recently, the investments in our national highway system, especially those begun in the early 1950's, right here in this committee as this Nation built the finest highway transportation system in the world.
Throughout history, the focus of this committee and Congress' investment in infrastructure has been to improve the speed with which goods and services could be distributed across America, the speed with which individuals could travel from point A to point B. But the sad point to realize is that today, for the first time in our Nation's history, we're beginning to see the pendulum swing back.
In today's Wall Street Journal, you'll note an article that says flights on nearly 75 percent of the major airline routes now take longer than they did a decade ago. That means that air transportation in America is becoming slower rather than faster for many commercial airlines. And for those of us who worry about the broader picture of aviation, the general aviation community as well, the same thing is often the case. Even though the airplanes themselves may be getting more capable, able to go at higher and higher speeds, the system, the entire system, is becoming less efficient and less capable. And more often than not, the cause of that is because of the lack of investment in airports and other infrastructure that's necessary to make the whole system work.
This committee, of course, is called the Committee on Transportation and Infrastructure, but perhaps a better name for it over its history would be transportation, infrastructure and economic stimulus, because the infrastructure investments that we make as a Nation really provide the most singularly important economic stimulus that comes from Government to our country.
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I can remember traveling across Pennsylvania when I was in Congress and visiting towns like Reading and Altoona. These were successful economic cities not because they had some special local resource like oil or waterpower, but because they were key elements of the railroad infrastructure of the 19th century. Similarly today, you can go out to Dulles Airport and look at all the growth in Fairfax County and realize that all this tremendous economic development has taken place because of aviation . Not just at the commercial hubs in this country, but at literally thousands of airports in every corner of this country.
I especially like Todd's metaphor earlier in the first panel, when he talked about the crisis facing aviation as an iceberg. And really it is scores and scores of icebergs, perhaps, but it is also interesting to think of that iceberg as the way we often do with icebergs, we only see the tip of the iceberg. And in a similar way with aviation, sometimes we only look at the big airports because they are the ones, the tip of the iceberg, that are more visible to most people.
Of course, the first panel talked at length about the crisis affecting those large airports. But the bigger part of the iceberg, really, especially from the point of view of economic development, are those 5,000 other airports—public-use airports—which are literally the only tie to hundreds, or even thousands, of communities in this country with our Nation's whole air transportation system.
And if the first panel talked about how we have failed to keep up with the investment needs of the large airports, I'm here to tell you that we have done an even poorer job at keeping up with the investment needs of these smaller airports for two very important reasons. One is that many of these smaller airports were built 50 or 60 years ago, we have to admit, largely because of the tremendous investment that was made in aviation during the time of the Second World War, when we were building over 100,000 airplanes a year and constructing nearly 1,000 airports every year.
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But the other reason, of course, is that today the technology has changed. Today the piston airplane that was the plane that won us the Second World War has been replaced, of course, by the turbine-powered aircraft. And these planes need larger, more capable airports. They need, at a minimum, a 5,000-foot runway in most locations in the country. They also need improved navigational equipment. They need literally billions of dollars if we're going to give to these thousands of airports across the country the kind of infrastructure they're going to need for the 21st century.
That's why NATA has created this American Aviation Access Initiative, a proposal to you and the Congress and the administration to dramatically increase the responsibility and activity of the Federal Government to fund improvements in these rural and suburban airports across the country so that each of these communities can be as much a part of the economic development of this Nation as those cities with larger hub airports.
This committee has played a role over its history of ensuring that every American, no matter where he lives, has access to highways, has access to trains, has access to the economic fabric of our country. And today it is incumbent upon this committee to realize that if in the next century every American is going to have that same access to the national aviation system, we've got to ensure that every community has a turbine-capable airport, able to provide full and fair access to the entire national aviation system.
I'd be happy to go into some of the details of our proposal, and also to comment on the Federal budget proposal that came out of the administration. I share the concerns that have already been expressed, but at this point I'd just like to thank you for the opportunity of being able to present these remarks.
Mr. DUNCAN. Well, thank you very much, Mr. Coyne.
Professor Button.
Mr. BUTTON. Thank you very much, Mr. Chairman. I too have a written statement. I will simply highlight one or two points.
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As you correctly said, at the moment I am professor of public policy at George Mason University, but prior to that, for two years, I headed up work at the OECD in Paris trying to further liberalize international aviation markets. One thing I learned from that experience is that if imitation is the most sincere form of flattery, then certainly the U.S. deregulation experience has been a success. Other countries in the world are imitating, and imitating very rapidly.
What you find at the global level or the national level is deregulated aviation markets serve to foster trade and to stimulate economic growth. But today I want to focus on a much more micro issue, the issue of what individual airports, individual air services do for local communities.
Now there is a lot of evidence out there of an anecdotal type. One reads plenty of reports, consultancy studies, and lobbying documentation, but as an economist, and academic economist essentially, for 30 years, I can say one thing: we actually know very little about what stimulates economic growth in any individual community. We have some ideas; they are not perfect.
So I woule to just share one or two thoughts about the roles that airports can actually play in this particular activity. I do make the point in the paper, and a very important point, that simply putting an airport in a location, or simply expanding an airport, does not necessarily stimulate the economic development nor the social cohesion nor any other positive effects in a community. One has to be very careful about what one is doing at the local level.
So what do airports do, if you introduce an airport or expand a local airport? I am going to try to give you some figures, and the paper does produce more figures. And indeed there is the odd calculation in the footnotes for those adventurous enough to go down there.
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Well the first thing is, when you build an airport, it does generate immediate employment and some immediate income in the economy. I do not think that is important. I think that is a relatively short term consideration. It may have some appeal if there is an immediate problem. But that is really not what airport development is about.
The first thing I think it is really about is the ongoing activity of the airport. An airport, as a number of witnesses have highlighted, generates ongoing employment at the airport. You have to service that airport, people are employed there, you have to provide fuel and servicing for the aircraft. That particular form of employment at the airport has an indirect effect on the local economy in terms of putting spending power in that economy. There is a so-called multiplier effect. These multiplier effects, in my view, are sometimes exaggerated. I tend to prefer the academic numbers than the consultancy numbers on this particular topic.
But nevertheless, at George Mason, we have done some work, particularly on Washington Dulles Airport just looking at what would happen if, for example, the through-put of the airport was reduced by between 2 million and 3 million passengers a year. The implication for the local economy—we call it the secondary effect the effect on jobs at the airport and the reduced spending power in the area—is something on the order of 5,000 jobs locally. That is not an insignificant number. It does have a very serious implication for the area.
Well, that is simply the effects of the people working at the airport and their spending power. There is also another area which tends to be rather less explored than this. And that is the question of what jobs does an airport actually attract to an area? We have an airport. It is an attraction. It provides services; it provides flights. What do these flights provide? Well, they tend to attract a certain type of employment. We tend to find it attracts what we classify as high-technology employment, a fairly general definition. But nevertheless, high-technology employment is attracted to airports.
High-technology personnel fly about 1.6 times as much as do people in other forms of industry if you just simply look at the business employment. In particular, we looked at hub airports. What do we find with hub airports? They seem to be a catalyst for attracting large numbers of high-tech jobs.
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We looked at the whole of the more than 300 metropolitan areas in the United States. Looked at those which are hubs and those that are non-hubs. We find, on average, a hub city attracts, or at least may generate internally, something on the order of 12,000 extra jobs as opposed to a non-hub airport. These are jobs attracted to the area mainly. Some may be associated with the actual employment at the airport, but the nature of the jobs suggests that they are attracted to the area.
We did a number of case studies as well, looking at particular airports. This analysis of this gives us a pretty good idea that it is actually the airport that is attracting the jobs rather than simply airlines moving into the area. It is actually a catalyst for development, in that sense, it seems to us that quite a large number, 12,000, of jobs are involved at each airport.
There is also a further effect, which is even less explored. If secondary hub-airport employment generation is under-explored, the very long-term effect of having an airport is virtually not being considered at all as far as I can see in either the literature or by analysts. But having an airport does have a long-term, perpetuation effect on the local economy. It stimulates the economy in the short term by having jobs at the airport, and the longer term by getting high-tech employment in. There's a further effect than that. It has a further stimulating effect on the overall economy of that region. Without that airport, the region could not develop in the way it does.
How you quantify this, how do you put numbers on it, of course, is a rather tricky topic. I don't even pretend to have a way forward on this. But nevertheless, it is an important area, I think, this notion that you can actually get perpetual motion, if you like, in terms of local employment.
So I really come to two conclusions. First of all that airports are important in an area. They have a multiplicity of complex effects which are largely under-researched, except in one or two small areas. And secondly, I think you have to be very careful when you start talking about individual airports. You do have to look at case studies. Generalizations are extremely difficult.
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Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you very much, Professor Button.
Mrs. Norton.
Mrs. NORTON. Thank you very much. I had been particularly interested in Professor Button's work because it involves the problem we are now facing about the slot rule and perimeter rule at National Airport. Now there's a whole set of arguments that go to safety. Those are, if you happen to represent the District of Columbia, very powerful arguments. This hearing is about economic effects. And the chief argument of Sen. McCain has been that slot and perimeter rules are anti-competitive.
As an aside, let me say I understand that the McCain bill, which was to be marked up today, has been pulled. I don't think it has much to do with the substance, but it may have a lot to do with the other activity going on in the other body.
I know that you have looked at this issue as the GAO has, and I'd like to ask you about your view of the GAO report, which, I take it, appears to reinforce the McCain approach that there will be primary economic effects that we all should welcome. I'd like to hear your view of that report, and especially am I interested in hearing you elaborate on the so-called secondary effects of a change in the slot and perimeter rule.
Mr. BUTTON. Yes, thank you.
I think first of all that I generally believe in competition achieving high degrees of efficiency. But competition does demand certain institutional arrangements, and these institutional arrangements do embrace a comprehensive approach to all forms of cost. Therefore, as an economist, I tend to take safety considerations and environmental considerations into account when weighing out policy options. I also take into account the various forms of subsidies that can exist, for example, in accessing different airports. When comparing, for example, National and Dulles, one may want to consider whether one is artificially advantaged by having subsidies to its transit system.
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But going onto your point of secondary considerations, I did not actually look in any detail about the implications for National. My suspicion is that National would not generate large numbers of additional employment; whereas, what you do have out in the Dulles corridor is—I was going to say a hotbed of high-technology activity, perhaps that's a little extreme—but certainly a very significant amount of high-technology activity, which does still need nurturing. We have not been through a severe recession recently. It does need protecting, at least in the short-term from any forms of disruption. I, therefore, feel that the disruptive costs of actually removing the perimeter rule from National could be quite serious.
My secondary benefits are, quite simply, the fact that if you do have an airport there are spillover effects on the local economy. The spillover effects are in the forms of the money from the airport being spent in the immediate region. People who work at the airport spend that money weekly. And I think the tertiary effects are important here. People like a large network of services, and you have to have that threshold to keep the activity going.
We didn't look at Dulles in terms of a hub effect, but certainly if you look at places like Cincinnati and Pittsburgh, they benefit by having a significant number and a large range of services on the airport operated as a major hub. Dulles is approaching that, but not there yet.
Mrs. NORTON. Well, of course, these airports are run by a metropolitan airport authority. And GAO looks at National and perimeter rule. Do you think one can look at any of these airports in isolation, or is this indeed a metropolitan area when it comes to airport transportation requiring a metropolitan analysis of changes of this kind?
Mr. BUTTON. You are talking, basically, about the three-fold airports around Washington. I include Baltimore as well in this to some extent.
Mrs. NORTON. Yes, although that is not regulated by the same authority. But, yes, when one looks at the economic effects, some of the time it makes sense for you to go all the way to Baltimore, and sometimes it doesn't. And some people really do use all three. Yes.
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Mr. BUTTON. Yes, they certainly do. I do. No, I think you do have to look at it in its entirety. I mean the calculations we did were primarily, in fact, almost exclusively, on the implications for the Dulles area of reducing services from Dulles for transfer to National as a result of the perimeter rule being relaxed.
It's very difficult to draw boundaries when it comes to airports. Defining a catchment area for an airport is an extremely difficult thing to actually come up with. I would suspect that if I was doing a detailed analysis of the region, I would look at all three airports together. And it's rather artificial just to look at two.
Mrs. NORTON. Yes, out of not for the record, I have supported the slot and perimeter rule, although, arguably, you could say that there would be some benefits to the District of Columbia because National is closer to the District of Columbia. There also might be grave hazards when one considers why the slot and perimeter rules were included in the first place. And there was an agreement throughout the region that an airport already known for its dangers needed to have this rule. So I would not, even though I am in a city that yearns for business, I don't know anyone in the city who would be willing to do that tradeoff in order to get a few extra slots. The tradeoff would be a life and death, or could be, a life and death tradeoff.
Thank you very much, Mr. Button. Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Ms. Norton.
Mr. Coyne, what is your position, or what to do you think about the administration's latest proposals on FAA reauthorization, particularly the phasing out of the General Fund contribution and potential user fees, and things of that nature? What effect do you think it would have on our aviation system?
Mr. COYNE. Simply put, I think the administration's proposal ought to be rejected by this committee. There are many elements of it that I think are counter to the interests that we have been talking about here all morning. Clearly you put your finger, perhaps, on the single greatest flaw in the proposal, the absence of a contribution from the General Revenue Fund to investment in aviation infrastructure.
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I could spend all morning talking with you just on that single point. We've already had several people comment on it. But suffice it to say that the history of aviation has been one where this Federal Government has throughout its history recognized the responsibility of the General Fund to support aviation. And for that to be reversed after virtually a century of consistent Federal Government support would be one of the most damaging things that I think this administration could do to aviation. And, of course, it would fall hardest on those communities least able to help themselves. We heard earlier about how the large airports have a variety of investment-funding choices, or sources; whereas, the smaller airports, in the communities below a million emplanements, or even smaller than that, the ones that are purely GA airports, those communities have got to look to the Federal Government's General Fund support to survive and to grow, and especially to make the investments that are needed on the next century.
The second part, of course, of the proposal that is so destructive is the—as was already mentioned by Mr. Bolen—this concept of once again proposing user fees on aviation in America. I mean there's a rule in baseball that you only get three swings, and three strikes and you're out. I believe this may be the fourth or fifth time that this administration has proposed this, and my hope is that the arguments that have been used in the past, the knowledge of this committee on both sides of the aisle about the obvious faults of this proposal would be more than enough to persuade the administration to not introduce it again.
Finally, I think the administration's proposal really does beg the question of do they have a commitment to airports at all. I think that at this point in our Nation's history, on the verge of a new century, facing the greatest growth in aviation in any country in history—I mean we will see another 200 million or 300 million passengers over the next 10 years—the general aviation community is growing, especially the turbine users, at a faster rate than ever before in history. We will grow from about 1.5 million hours of private turbine business use now to more than double that in just the next 12 years. And with this tremendous growth in demand—with the public saying they want more aviation capacity in America—for this Government to turn around and say in its proposal that we see only a very modest, if at all, increase in airport investment I think is a serious mistake, and I hope that the committee very seriously looks at this proposal and can quickly make some corrections.
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And I hope you'll also look at our Airport Access Initiative proposal to understand how important the smaller airports are across the country and how significant an increase in investment is needed.
Mr. DUNCAN. Well, I'm anxious to read that. It looks like a very interesting paper that you have prepared there. And we were talking earlier about the delays, and I had not seen this article until just now that you mentioned from the Wall Street Journal today. Do you think that most of those delays—they are talking about the flights between, I haven't read the article—but they're talking about the flights primarily on the major routes. Do you think we can do more to remove some of these delays by working on the infrastructure of the airports or do you think its more of an air-traffic-control problem?
Mr. COYNE. I think it's both problems. I would say that right now, in certain parts of the country, you could make the argument that it's a greater air-traffic-control problem. Certainly, in this Philadelphia to New York example that's used in the article, that it now takes 20 minutes longer to fly by commercial plane from Philadelphia to New York than it did 10 years, certainly you can make the argument that the air-traffic-control system around New York has really become much less capacity-capable than what it was 10 years ago.
But I think in the long run, I think the airport problem is the greater problem. I think that we have reached a point in this Nation's history where we're just not expanding airport capacity almost at all. I mean, when you ask yourself, how many new airports are planned in America over the next 10 years, most of us cannot think of a single one; whereas, virtually every other decade in America this century we have built scores, hundreds, if not thousands of airports during the course of the decade.
And clearly for the next century, we are going to have to dramatically increase the airport capacity. And I disagree with those people who say it can only be done, or it will best be done, by increasing the number of gates or the number of runways at existing airports. We can only build so many gates. Do you expect that O'Hare is going to have 5,000 gates at the end of the next century. Of course not. We're going to have to build the capacity at other airports around the country, especially those smaller airports nearby to service those needs. And now, with new regional jets going to communities with jet service that never even dreamed of having jet service as recently a few years ago, we have to get longer runways at those airports in addition to building new airports from the ground up. So I think it's a tremendous challenge to this committee. I think for the first time in a long time this Congress and this administration begins to realize that this is a problem and, hopefully, the stars and the planets and the moons are lining up so that this Congress, under your leadership and that of Mr. Shuster, and, and the other members of the committee, can really make some substantial changes and look long into the future to provide the needs of American transportation.
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Mr. DUNCAN. Mr. Boyer, I had never seen all the figures since statistics I had seen. I hadn't seen that report about 6,800 airports becoming 5,000 since the 1970's. Did most of those airports close because of suburban growth or urban sprawl? Or were most of those, did some of those occur because of consolidation within the industry? Before we passed the General Aviation Revitalization Act, I know some of the general aviation manufacturing was in steep decline, almost going out of existence, I suppose in some ways. What's been the cause of this?
I want comments from you and Mr. Bolen on that.
Mr. BOYER. Probably, you said it in your first line, the urban growth. The fact that many of these airports were in rural communities and as, once again, improper zoning has caused those subdivisions to come right up to the ends of the runway. You only need to look up by I–270 at Montgomery County Airpark at Gaithersburg, and you can see where the homes have almost approached what was a vibrant airport in a very rural setting. Many of these airports that have closed from the 6,800 to the 5,000, have been privately owned, public-use airports open to the public. So obviously these private owners have found that as the urban growth gets closer to their land, it becomes more valuable. Perhaps it's more valuable because of the lack of a vibrant general-aviation industry until the passage of that act. It's become more valuable to just sell that land for a subdivision, let's say, or for a shopping center, which is often the case.
Improper zoning has caused a lot of this to happen. In addition, some of these private owners are aging. Many of them are getting up in years, the family doesn't want to continue to operate the airport, so they decide at 70, 75, 80 years of age, let me sell it off now and then the family won't be burdened with what to do with this land.
Increasing taxes has caused many of these to be converted in many cases. And then the word that we use, that, as I said, has sapped a lot of AIP funds, that ugly ''noise'' word, is another reason that many of these facilities have closed. And no one has taken a look at, really, if you tear up the runway now, what economic benefit would there be for it in the future.
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Mr. DUNCAN. Mr. Bolen.
Mr. BOLEN. I agree with what Phil said. I think he is right on track. I think it also points out, and I alluded to it in my earlier comments, about the integration that there is in the system. We are all inextricably linked together. If there are not good airports, having good general-aviation airplanes does not create a vibrant industry, and vice versa. And we've got to have both of those in order to have a successful service industry. It's all linked together. And what I think we're trying to do is say we feel like we're beginning to get some growth in certain parts; we're beginning to see new pilots; we're beginning to see new products; we're beginning to see people make investments in the industry itself. We've got to invest in the infrastructure or all the other progress we've made will go for naught.
Mr. DUNCAN. Well, I'll tell you, I remember several years ago seeing a poll that was taken just of people who lived in the largest cities in this country, and this survey said that over half of the people who lived in the large cities wanted, or preferred, or thought they wanted to live in small towns and rural areas if they could find a job. And I think, if anything, that that feeling has probably grown. And, in fact, yesterday, there was an article in the Knoxville News-Sentinel about how the trend in Tennessee farmland is people retiring and buying what are called gentleman farms of five acres or a little bit more than that.
So, you know, what I'm seeing is a lot of people want to get out of the big cities, and they would like to move their companies, they would like to retire to some of these smaller towns and rural areas. And I think if we could do something to help reverse this decline in these general-aviation airports, or we could help these airports in some of these smaller towns or rural areas, that that might be a good thing for the future because I think you're going to see more and more people who are working out of their homes. You know, with all of the new technology we have, I think in future years they're not going to have be as many people living in these big central cities if we can keep our aviation system strong.
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Mr. COYNE. Mr. Chairman, may I make a point to that question that you asked about the airports, why they declined? I think Mr. Boyer was very correct to point out that many of those airports that have been shut down are private airports. And you have to realize that these private airports are, I think, one of the best opportunities for America's aviation system to take advantage of. They are private businesses running airports. As you heard in the first panel, many people want to know about how do we get private ownership of airports, and yet we're not supporting the current private airports we have. Many of these private businesses that run these small airports want to expand their airport, they want to enlarge their runways so they can meet the needs of the current users, the turbine operators especially. And more often than not, they are checkmated, one way or another, at the local level. And the Federal Government does not support them in that effort to grow their airport businesses because they view them as a private entity.
And one of the elements of our Aviation Access Initiative is to make it easier for these private airports to participate in the Federal aviation improvement program, receive funds for that, hopefully, at a very substantial level over the next 15 years so that these private airports that are currently being shut down can survive in the future.
Mr. DUNCAN. Well, thank you very much, Mr. Coyne.
Mr. Lipinski.
Mr. LIPINSKI. Thank you, Mr. Chairman. Just for the record, I think the administration's proposal in regards to user fees does keep general aviation with the same fuel tax that they have had. Is that not correct?
Mr. COYNE. I think it isn't entirely clear as to how they're defining general aviation in that proposal. And until I'm clear at how they define general aviation, I'm not sure I could agree with your statement fully. My view is that they have not, in fact, answered that question clearly enough for, certainly, our satisfaction. And even if they did exempt some elements of general aviation from the user fee, which obviously is a step in the right direction, it is unclear whether that would be a permanent exemption or whether, in fact, that would lead to other deleterious effects because not being part of the funding equation, some elements of the community might feel that they're no longer welcome at the table in deciding how these investments are spent.
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Mr. LIPINSKI. Phil, do you have any comments?
Mr. BOYER. We read it the same way. When we actually got into the detail, we did find the part, because at first there was nothing about an exemption for general aviation. You'd think after six years and many letters from my members, the White House would get a little bit smart and say why don't we just put up front, it's not for general aviation. Just the same way that NATA read this, our people have found that the general aviation users would still pay a fuel tax, but it doesn't say anything about being exempted from the user fees completely, as we see it.
About the only thing certain in the White House proposal, and the only people that can probably sleep well at night, is with all this idea of productivity increases, performance-based organizations, funding through user fees, is two things are certain in the White House proposal. Buried deep, if you read it close enough, all union contracts will be protected.
Mr. LIPINSKI. I applaud that.
[Laughter.]
Mr. BOYER. OK. That's one thing certain. And the second thing is that the General-Fund contribution, and don't forget, that covers the military use of our airspace system, would be eliminated.
Mr. LIPINSKI. Well I definitely don't applaud that. I believe with you that the contribution from the General Fund, particularly for the military use of the entire system.
Phil, you mentioned support for PFC. I just assumed that your organization supported PFC's in light of the fact that it would seem to me that it would be advantageous to your type of airports to advocate the PFC because it would free up more money from AIP for your airports.
Mr. BOYER. Well, it's seldom we don't take a strong opinion on something, but I must tell you that we have not weighed in—you probably have not seen me here at this table in all the time we've known each other—either advocating for or against. We really have no position because it's a very, very small amount of money that is delivered, as you saw from the GAO report. As I said in some.
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Mr. LIPINSKI. But in light of the critical situation facing many of your airports, I would think that it would advantageous to your organization to support an increase in the PFC by freeing up, you know, more money. It may not be an awful lot, but it certainly would be more money. And you usually do take very strong positions in regard to everything in the aviation field. So I'd like you to go back and check with your membership and see how they feel about that, Phil.
Also, what about lifting the cap on slots. Wouldn't that be advantageous to your organization? Wouldn't you have more opportunities to land at places like O'Hare Airport and LaGuardia and Kennedy and Washington National?
Mr. BOYER. Boy, you got me on two issues today that we really stay right in the middle of the line, although we will take another look at PFC's in light of maybe changing the formula also as we go for increases.
I wish Congresswoman Norton was here to admit this because I made a list of airports that we would use instead of Washington National: Leesburg, Montgomery County, Frederick, Manassas, College Park, Hydefield, Leefield, Martin State, and in just this surrounding area. And I'm probably missing a few. In the main, the general-aviation pilot does not want to mix in with airline traffic. In the main, the general-aviation pilot is more interested in getting closer to their destination. And, except for the uniqueness of Washington Reagan National Airport, there really are usually alternatives such as Schaumburg, such as your own Midway, such as Palwaukee in Chicago, and other airports that are going to put them closer to their destination than the hassle factor that will be created by a large metropolitan airport.
Mr. LIPINSKI. You missed one of your favorite airports there Phil. You didn't make mention of it. The one on the lakefront in the city of Chicago there.
Mr. BOYER. I wanted to bring it out of you, Congressman.
[Laughter.]
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Mr. LIPINSKI. Well that's fine if you're not going to use Washington National in there. There'll be more opportunity for an airline like United Airlines probably to get a few more slots over there. And I'd even have a wider range of opportunities to fly back and forth from Chicago to Washington Ronald Reagan National Airport.
Mr. COYNE. Congressman, can I make a comment on that?
Mr. LIPINSKI. Have you ever taken a position that one either, Phil? Wait a second, I'll be right back to you. You haven't taken a position on the slots either, Phil?
Mr. BOYER. We feel limiting the general-aviation slots is definitely bad. We have taken a strong position against the limitation or reduction of those slots. We went along with the slot program, reluctantly, in the interest of safety, as it was brought out earlier from former Secretary of Transportation Skinner. But we definitely have a concern when anyone is going to start tampering with a reduction of the access of general-aviation aircraft to those same airports.
Mr. LIPINSKI. I think you ought to go back and check your membership on the general elimination of slots also, Phil, because you do have very strong opinions, and I'd certainly like to know what the general-aviation industry's opinion is on slots.
Yes sir.
Mr. COYNE. Well, as Phil knows, and I think as he reflected with his comment that in the main, his members—the general aviation community, of course, includes an awful lot of air charter operators, part 135 business operators, who, in fact, as I mentioned earlier, their use is growing faster in America than even commercial airline growth. And those aircraft have a tremendous need for improved ability to land at places like National Airport and O'Hare Airport. And whatever can be done to increase the capability of this turbine fleet, which will soon be flying over 3 million hours a year, and a considerable amount of it goes into National. For the entire general-aviation turbine fleet, National Airport is one of the top five destinations in the country.
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Mr. LIPINSKI. Excuse me, if we lift a slot over there, you'd like to be—I mean, the cap over there on slots, you'd be able to get in there a lot more, right?
Mr. COYNE. However you do it, by lifting the slots or changing the numbers of slots. Whatever allows more turbine operations to come into these very important airports that are so critical to the turbine general aviation fleet, is important to us. And we'd be more than happy to talk to you about that, Congressman.
Mr. LIPINSKI. In regards to the fuel tax, I'm certainly going to pursue that because I'd like to put your mind at ease, Phil, that the administration is not attempting to change anything in regards to general aviation.
I think you just mentioned something about safety, or you mentioned that Secretary Skinner mentioned something about safety. But the Department of Transportation has now said that there is no reason to have a slot restriction at airports because of safety, and that's why it was put on because of safety. They have maintained now that the reason for it is local political concerns.
Mr. BOYER. If I could speak for a moment very personally, I flew into Washington National Airport this morning in a general-aviation aircraft. I was No. 4 to land on a bright, beautiful sunny day. That airport is near capacity for both the airlines and for general aviation.
On a good day, where a slot is not needed for a VFR flight, and two of those flights were general aviation, two that were airliners in the four. By the time I added it all up, just like the article in the Wall Street Journal said, I could have driven from Frederick, Md., down here today and arrived probably faster than leaving the house, going to the airplane, preflighting, getting here. Only because the plane was needed this afternoon to go to Knoxville—as a matter of fact, the Chairman's district—did I fly it down.
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But we are near capacity, and I think an answer in a previous panel—and pardon me for digressing for a moment—but I think the previous panel, which had large airports on it, if we modernized the NAS system, and, you Congressmen know, that we're involved in a lot of those discussions, it has been proven that the big bottleneck will be the air side of our airports. If we have closer spacing, if we produce greater efficiencies for getting more planes to a certain destination, we still have, like I facetiously said, never left a plane in the air—it always has to come down. And the other thing is, we haven't figured out a away to put more than one on a runway at the same time. So as we modernize the NAS, we are going to need much greater runway capacity. And that's been proven by several studies, including one I can supply the committee done by American Airlines, stating as soon as 2005, there will be delays in departures if we accomplish the modernization of the air traffic system.
Mr. LIPINSKI. Thank you for that, Phil. I simply would say that I flew in from Chicago yesterday on the world's greatest airlines, United Airlines—I say that because they're sitting in the back over there, and I do fly them all the time—but we had no trouble getting in. Not only was it not on time, it was 15 minutes early. So if we could have landed there 15 minutes early, there was probably an opportunity for two or three other planes to land in that window between when we were scheduled to be there and when we actually did land.
Moving on to Professor Button, Professor, you've conducted a study for the effects of if the slot cap was removed at Washington National for Dulles?
Mr. BUTTON. Yes, we tried to have a look at the impact on the local economy in the Northern Virginia area of relaxing the rules at National Airport. As a consequence, certain flights would therefore transfer from Dulles to National. So you'd have a diminution of the throughput at Dulles Airport. And we looked at the impact on the local economy in that area of the reduction in the number of passengers going through Dulles.
Mr. LIPINSKI. Unfortunately, we have to go, but we're going to contact you, professor. I'd like to speak to you more about this.
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Mr. SWEENEY. [presiding] Thank you, Mr. Lipinski. As we've just been notified, we have to go down to the floor to have a vote in the next 10 minutes. I want to thank the panel for appearing today. And this will conclude today's hearing. We will reconvene tomorrow at 9:30. And again, I thank you very much for your help. Thank you.
[Whereupon, at 12:36 p.m., the subcommittee recessed, to reconvene at 9:30 a.m., Thursday, February 11, 1999.]
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