Segment 2 Of 3 Previous Hearing Segment(1) Next Hearing Segment(3)
SPEAKERS CONTENTS INSERTS
Page 13 PREV PAGE TOP OF DOC Segment 2 Of 3
FUNDING AND INFRASTRUCTURE ISSUES AT SMALL AND MEDIUM SIZED AIRPORTS
(Wichita, Kansas)
Monday, February 22, 1999
House of Representatives,
Subcommittee on Aviation,
Committee on Transportation and Infrastructure,
The subcommittee met, pursuant to call, at 11:30 a.m., in the Century II's Expo Hall, 225 W. Douglas, Wichita, Kansas Hon. John J. Duncan, Jr. [chairman of the subcommittee] presiding.
Mr. DUNCAN. I want, first of all, to say good morning and welcome everyone to this hearing of the House Aviation Subcommittee. And before we begin, I would like to, first of all, thank Jerry Moran and Todd Tiahrt for their help in setting up this hearing. And I first have to cross the format of asking a unanimous consent to allow Mr. Tiahrt to participate in this hearing as if he were a member of the Committee and without objection, so ordered.
Mr. BOSWELL. I may reserve my right.
Mr. DUNCAN. I think it is a great idea. We are certainly pleased to have all of the Members for this field hearing and all of the witnesses and other participants who have taken time out from their busy schedules to come and be with us this morning. The Aviation Subcommittee, several members have just returned from a trip to Dallas/Ft. Worth and Colorado Springs and Miami where we met with airport people in those locations and top officials of Delta, American, UPS and Federal Express and other companies. And certainly that was a very educational and informative trip. But I have always felt that we need, occasionally, to get out of Washington and come hear the concerns and the needs and the problems of people outside of the beltway. And we have held three hearings already on the FAA reauthorization bill that we will be working on, I suppose, for the next several months in which we'll cover a lot of things. But we are going to hold this hearing here today and also we are going to have another hearing in two weeks from today in Huntington, West Virginia. I do personally know of one of the problems, and that is the pricing of airline tickets because it cost me $1,000, government rate, to fly from Knoxville, Tennessee to Wichita. And somebody told me there was an ad in the Washington paper a couple of days ago offering a trip from Washington to Spain
Page 14 PREV PAGE TOP OF DOC Segment 2 Of 3
and two nights hotel lodging and breakfast for $348. So certainly this is something we need to work on. In fact, Bailis and I saw a gentleman who lives in Utah and he was taking a trip out this morning and his round trip
was $1,267, didn't he say, Bailis, or something like that?
Mr. BELL. Uh-huh.
Mr. DUNCAN. Today we will focus on this and funding on infrastructure issues on small and medium sized airports. These issues are very important to me. As you know, my district is served by McGhee Tyson Airport and we have 1,600,000 passengers, which makes us almost identical in size to the Wichita airport. So I know too well some of the difficulties and problems.
In fact, many of our problems are very similar, although we are having some success here over the last few years. A few weeks ago the General Accounting Office testified that airports throughout the United States need approximately $10 billion a year to fund needed airport improvements and development. And this is certainly consistent with the fact that air passenger traffic and air cargo traffic are both shooting way, way up.
We flew 615 million passengers last year the first time without a single commercial fatality. Unfortunately, most estimates are that funding falls at least $3 billion short for these needs and the problem is much worse for airports that serve smaller communities. In fact, by some estimates, and I am sure we'll hear about this shortly, small and medium sized airports are the ones that are hurting the most and they receive probably only half of the funding that they really need.
For that reason I think it is particularly important that our community succeed with the aviation trust fund. We must be able to send aviation taxes on to our aviation system.
Also it's a very, very important economic development. There are environmental extremists who seem to want to put everybody into a big city and turn half the country or more into a wilderness. But I saw a poll a few years ago that said that over half of the people who live in the big cities would like to live in small towns and rural areas if they could find jobs there, if they had that choice.
Page 15 PREV PAGE TOP OF DOC Segment 2 Of 3
I expect that figure would be even higher today, and it seems to be a baby boomer kind of thing now to bridge the states where many, many of us would like to get a little land. And certainly we are seeing that trend in space in Knoxville, Tennessee, where I come from.
Today witnesses will focus on this, the impact of the smaller and medium sized airports. We'll first hear the assessment from Dr. Dillingham in the General Accounting Office who has been a frequent witness in front of our Committee.
One other thing that we will get into, though, is inadequate air service. Last year I, along with a number of members on both sides of the aisle, introduced HR 2748. The Aviation Subcommittee held two hearings where we heard from a number of witnesses, including representatives from airports and communities that have experienced higher air fares and limited air service since the deregulation of the airline industry in 1978.
And certainly deregulation has been a great, great success, but there are what are called pockets of pain. HR 2748 simply sought to bring air service to the medium and smaller communities across the Nation where there are these pockets of pain and we try to do this in a way that would not bring unwarranted government and interference in that aviation industry.
So, that bill would have allowed the Department of Transportation to grant exceptions from the slot rules for underserved communities and would have established a $5-million-per-year grant program to fund marketing programs at underserved communities.
Also a loan guarantee program for regional jets is included, which most people think are going to revolutionize the aviation community. This bill has now become the starting point for much of the discussion that is going on in Washington concerning these issues.
I might just add, before I turn to other Members, that I was a lawyer and a judge before coming to Congress and I have always thought that we have had so many rules and regulations that they can't even design a computer to keep up, much less a human being. So I am pretty skeptical for the need of a lot of legislation. But I think one of the best things that Congress ever did that came out of this Subcommittee a few years ago is the General Aviation Revitalization Act. And I was talking to Ed Bolen a few minutes ago, and we were able to do some things in that legislation.
Page 16 PREV PAGE TOP OF DOC Segment 2 Of 3
As many of you know, we took an industry that just about died down and made some provisions that started it back up and came back with a bang. And I believe that you had orders or delivered over 200 aircraft last year. And, was it 5.9 million, 5.9 billion, and what a great thing. And Ed tells me he thinks this year it will be even better. So I think that is a really, really fine thing for this area and for the country.
I want to go first, though, for statements from the Members and we'll go to the ranking Democrat, to my friend, Leonard Boswell from Iowa.
Mr. BOSWELL. I am real privileged to be here and thank you, Mr. Chairman, for what you said. I come up from Southern Iowa, up Interstate 35. And if you ever drive up through that way for some reason and get to the 56-mile marker, check my cows. If something is wrong, do something about it, but that is where I come from. And we, Jerry's got, I guess, a very large district, 60 counties.
Mr. MORAN. Sixty-six.
Mr. BOSWELL. And I thought I had a big one. I wanted to bring that up for one thing. I think we have proven for over the last 15 years that economic development can take place out here in these areas as well as anywhere else. It doesn't have to be in the capital cities, if you will.
Today's technologies, and if we put the transportation out there with it, today we are talking about air. If we can do that we can have folks living out in the smaller communities and if you bring 20 jobs into a small town, I know I have many of them, as I know Jerry does, and the rest of the panel, that has to be a big impact on the quality of life, a big impact on churches, schools and everything else.
I have one of those areas of pockets of pain so I am interested to hear what you say here in regards to what the needs are. I think I have some idea what some of you might have to say. But I will say this, I am glad to be here. I am anxious to hear what you have to say with us and I have always enjoyed, I have spent a number of years in Fort Sill and I traveled through Kansas to get to Fort Sill and I went back and forth and I spent some time in Fort Riley. So I know a little bit about your state and I am proud to be here. And thanks for inviting and including me.
Page 17 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. DUNCAN. Thank you very much, Leonard. We are here primarily at the request of one of the members of the Subcommittee, your fine Congressman, Jerry Moran. And I will call on him at this time for any opening statement he wishes to make.
Mr. MORAN. Thank you. I just want to take the brief time I have in an opening statement to thank you, in particular, and other members of this panel for their willingness to come to Kansas. Members of Congress have plenty of opportunities to spend their time in their own districts and have family responsibilities and Congress is out of session. Often the last thing we want to do is find somewhere else to go, but you all and you in particular, Mr. Chairman, were willing to do that.
Issues of airport aviation as well as service, commercial service, and the price for that service are very important issues to the citizens of the state of Kansas. These will focus on two matters that are clearly critical to our future, the issue of availability of its service and its price as well as the use of trust funds for improving the infrastructure across the country but particularly what we do to improve the infrastructure improvement of airports in real communities. So two very vital topics to us as Kansans.
I want to personally thank Congressman Tiahrt. This is a joint effort by the two of us to have you in Wichita, and Congressman Tiahrt has led the way in a number of respects with regard to aviation. He was a member of this Subcommittee before being appointed to the Appropriations Committee, and it's great to have his input and resources with us and he has led the efforts in Congress.
And he is on the House side on the Wright amendment, which matters greatly to this community, and I and the Wichita airport. And I appreciate him allowing us to travel to his district, although, this is not solely a Wichita issue, it is a Kansas issue, and I am grateful that you would pay attention to us by your presence today. Chairman Duncan. Thank you very much. And I do think there is a great determination in both the House and Senate to try to do something about some of these problems, and in this particular year, but we, this is my second visit to Wichita and I was here two years ago this month along with seven or eight members of our subcommittee and we were here then at the request of Congressman Todd Tiahrt and toured the Raytheon facilities and had a nice visit before flying on to Seattle.
Page 18 PREV PAGE TOP OF DOC Segment 2 Of 3
And, Todd, we are certainly pleased to be here with you. We know this is your district and you are doing a great job of representing Wichita and the Congress and it's a privilege to be here with you once again. Do you have anything to say? You can at this time.
Mr. TIAHRT. I would like the time to submit my statement in writing and briefly say I want to welcome the members of the Committee. I was just looking at what areas of the country were represented. Chairman Duncan, you are from Tennessee, we have people from Pennsylvania and Arkansas and South Dakota and I think we'll get a good slice of America and the problems we are having maintaining a good solid infrastructure. And Jerry Moran, who did the heavy lifting in setting up this event, and he had the best interest of Kansas at heart and I appreciate that.
I think that I would like to say that it's very important we build a strong infrastructure, not only in our larger airports but also our small and medium airports. Many small economies are hampered from growing until they get a good solid airport, but there are also health care issues most people overlook. A lot of our hospitals turn in to emergency facilities and long-term care facilities, and in order to get physicians in and out we have to have a good airport so that we can help their medical needs. So it's very important we see that this gets done.
And I am glad we are able to talk about the Wright Amendment. We haven't had a level playing field or lower air fares for Wichita because of the Wright Amendment. I hope we can make the members of the Committee here aware of he problem so we can get repeal of the Wright amendment and enjoy the benefits of full competition.
So I want to thank you for coming and I appreciate your support on these issues and I know you have been a good leader, Mr. Duncan, and I appreciate the opportunity to be here.
Mr. DUNCAN. Thank you very much. And now we will go with the other members who, I understand, have very brief opening statements. First, Congressman Pease from Indiana.
Page 19 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. PEASE. Thank you, Mr. Chairman. I, too, want to thank you for conducting this hearing. I have said many times that my district is very similar to this one. It is a rural part of Western Indiana. I have had many conversations with my colleague, Congressman Burton, whose district contains the Indianapolis airport and all of the economic benefits of that airport. But the flight patterns go over my district so the noise is my territory. So I have a special interest in what goes on in aviation.
But I bring an additional perspective to this Committee. There are seven institutions of higher education in my purview which are heavily involved in aviation and air-based engineering, including Indiana State University, which is heavily involved in training professional pilots and aviation administration. So I am very sensitive to the impact that aviation has beyond the immediate things that we might consider in our work. I am very grateful for the fact that you are here.
I also want to thank our Congressmen Moran and Tiahrt for their hospitality. Thanks to the folks from Raytheon who gave us tremendous information this morning. And we expect similar information from Cessna. And for all the folks here in Wichita, you made it a very pleasant trip already. Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you very much, Ed. And we'll go to our good friend Asa Hutchinson from Arkansas.
Mr. HUTCHINSON. Thank you, Mr. Chairman. And, as you mentioned, it is good to have a field hearing outside of Washington, D.C. In my time I have learned that the mind works better when you are away from that city. So it's good to be in the heartland.
This is an important year for aviation. I think all of us have similar backgrounds and interests in our districts. My district is Western Arkansas. We have small sized airports and medium sized airports that need assistance. We just completed a new airport in Northwest Arkansas, a regional airport, which, I guess, is about the newest airport on-line. But it becomes increasingly difficult to add improvements and to find the funding necessary for airport improvements. So I hope when the FAA does reauthorization this year we'll not only assure safety and have that as the highest priority but also find new means of providing financial assistance for small and medium sized airports so they may be aided in their effort to provide top quality services to passengers.
Page 20 PREV PAGE TOP OF DOC Segment 2 Of 3
And further, we have to find ways to encourage competition. The pricing structure is difficult and I know that problems exist here in Kansas. But they are also present in Arkansas in my area. So I hope that those will be some of the things we hear about today, in addition to considering them during FAA reauthorization.
So I thank Mr. Duncan and Tiahrt and Moran for inviting us to this hearing.
Mr. DUNCAN. I always told people that East Tennessee, where I come from, it's the only place in the whole country where the people speak with absolutely no accent whatsoever. But Asa comes pretty close.
Next, our good friend, John Thune, from South Dakota.
Mr. THUNE. Thank you, Mr. Chairman. I want to say it's great to be in Kansas and I want to thank you for your efforts to improve service to serve the airports. The legislation that you introduced the last session of Congress and reintroduced this session of Congress is very important to states like mine. And I represent the entire state of South Dakota that is similar to certainly this area of Kansas, as well as the entire state, and I want to thank my colleagues, Moran and Tiahrt, to focus and put forth their efforts to improve it.
It is a critical issue in rural areas in the country and I think the funding servicing issues are all things that we'll get in to today. But as we head down this road toward reauthorization, the FAA airport improvement program, we need to look at other ways that we can improve quality of service as well as availability of service and repair and improve infrastructure in this country so we can accommodate people who use the air travel in the safest most efficient manner possible.
It is a case in point, I came down from South Dakota. It took me six hours. I may have been able to drive it faster. In South Dakota we love to fly into airports but we love to live in our houses. This is an important issue in this part of the country. I welcome the opportunity to be here and look forward to the discussion that we'll have in hearing from the panel.
Page 21 PREV PAGE TOP OF DOC Segment 2 Of 3
So, thank you, Mr. Chairman and colleagues from Kansas for holding a hearing.
Mr. DUNCAN. We'll go ahead and start with them. Number one, and as is our practice, we proceed with the witnesses in the order that they are listed on the official call of the hearing. And that is as follows: Our first witness will be Mr. Gerald L. Dillingham, who is the associate director of transportation issues for the General Accounting Office; Mr. Bailis F. Bell, who is director of airports for the Wichita Airport Authority; Mr. Timothy F. Rogers, director of Salina Airport Authority; Ms. Cheryl S. Beatty, who is city manager of Kingman, representing the Kingman Municipal Airport; and Mr. Byron ''Skip'' Reed, chief pilot of the Zachry Construction Company on behalf of the National Business Aviation Association. And we are certainly grateful that each of you would be here with us today. And we'll proceed now with Dr. Dillingham.
TESTIMONY OF GERALD L. DILLINGHAM, ASSOCIATE DIRECTOR, TRANSPORTATION ISSUES, RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE
Mr. DILLINGHAM. Thank you, Chairman Duncan, Mr. Boswell, Members of the Subcommittee. We appreciate the opportunity to be here in the special field hearing in Kansas today.
With me is my colleague, Mr. Aussendorf. He's been working in this area a long time as well. As the Chairman mentioned, we have appeared before the Subcommittee numerous times over the last few years. Generally we have been talking about the National Airport System.
Today our testimony focuses on financial needs of the Nation's smaller airports. Smaller airports is a term we use, but encompasses all but a few airports that make up the National system.
Page 22 PREV PAGE TOP OF DOC Segment 2 Of 3
There are approximately 3300 airports of all sizes that make up the national system. Slightly over 3200 of those airports are defined as small airports. They range from small hubs like Wichita Mid-Continent to general aviation airports like Kingman Municipal, which is west of here.
This morning I would like to talk about three specific questions that are important to smaller airports. First, how much funding do the smaller airports have for their capital development needs, and where does that money come from?
Second, how do current funding levels compare with the amount that smaller airports plan to spend for development?
And third, what would be the effect of various proposals to increase funding or make better use of existing funding?
Regarding the first question, based on our analysis of 1996 financial data, we found that overall, small airports were able to acquire about $1.5 billion to fund capital projects. This is contrasted with the Nation's 71 largest airports which acquired about $5.5 billion. This is more than three times as much as smaller airports.
When you analyze the source of those funds we found that just about half of smaller airport funding comes from Federal AIP grants. Another source of funds, are often considered only available to larger airports, are tax-exempt airport bonds that are also used as a source of funds for smaller airports. In 1996 smaller airports issued about $470 million in various types of bonds. State grants are another funding source for smaller airports. Roughly two-thirds of all State grants, or about $184 million, went to smaller airports.
And although the State of Kansas has not funded airports in the past, its legislature is currently considering legislation that would establish long-term funding for airports.
The last principle source of funds for airports is passenger facility charges or PFCs. PFCs provide about $111 million to smaller airports. Roughly half of the smaller airports that are eligible to collect PFCs actually do so. For example, Wichita's airport is the only airport in the state with a PFC and has collected almost $2 million per year since 1995.
Page 23 PREV PAGE TOP OF DOC Segment 2 Of 3
While general aviation airports cannot collect PFCs, they benefit indirectly from the PFC collections of larger airports.
This is the case because Federal law requires large airports that impose a PFC to return 50 percent of AIP entitlement grants to FAA.
A majority of these returned AIP grants are redirected to smaller airports.
The funding picture I have just described for smaller airports contrasts significantly with the picture for larger airports.
Smaller airports are very dependent on Federal grants for funding, while larger airports rely primarily on tax-exempt bonds.
On average, the larger airports are also financially self-sufficient, generating additional income even after covering the substantial interest expense of their bonds.
By contrast, as a group, smaller airports do not generate any income, after operating and interest expense are covered, that they could use toward capital development.
Now, to answer the second question, how does smaller airports' funding compare to the cost of their planned development? I think the panel has a bar chart up there and I want to talk from that for just a moment.
[The information follows:]
[Insert here]
Between 1997 and 2001, smaller airport plans call for nearly $3 billion in capital improvement project annually. This is twice the amount of funding they received in 1996.
This $3 billion in planned project breaks out as follows: To maintain their current infrastructure and to fund safety and security and environmental projects, it would cost an average of $750 million annually. These are the projects that represent FAA's highest priorities. This $750 million just about equals the total amount of funding small airports received from AIP in 1996.
Page 24 PREV PAGE TOP OF DOC Segment 2 Of 3
On top of FAA's highest priority items, smaller airports plan to send another $1.7 billion per year on other projects that are eligible for AIP. These are projects such as adding capacity and bringing airports up to current design standards. They also plan to spend another $500 million a year on projects not eligible for AIP, such as adding commercial space and terminals.
Our research has also showed a difference between the money available and development plan for larger airports as well. But the difference is more significant for smaller airports. Large airports face a funding shortfall of only about 20 percent as compared to a funding shortfall of 50 percent for smaller airports.
Turning to our last question, the effect of various proposal and initiatives to increase and make better use of funding for smaller airports. These proposals mostly involve making some change to AIP funding or to PFCs. If Congress decides to increase the amount of AIP funds available it would help smaller airports more than larger airports. About two-thirds of any increase in AIP would go to smaller airports. However, any decline in AIP hurts smaller airports the most.
The President's budget for fiscal year 2000 proposes funding for AIP of $1.6 billion. This would be $350 million less than this year.
With regard to the PFC related proposal, airport groups and the Department of Transportation have recommended raising the maximum PFC that airports can charge from the current $3 to $5 per flight segment.
Our analysis shows that an increase in PFCs would primarily benefit larger airports.
For example, for each dollar increase in the PFC, airports would collect an additional $478 million - 90 percent of that money would go to larger airports.
Therefore, if Congress decides to increase PFCs, it may want to consider reallocating some additional portion of AIP in favor of smaller airports.
Page 25 PREV PAGE TOP OF DOC Segment 2 Of 3
For example, if the larger airports that collect a PFC would increase the percentage they return in AIP entitlement grant from the current 50 percent to 100 percent, this would give smaller airports another $200 million in AIP funding.
This would also be a step towards maintaining a balance of financial capacity between larger and smaller airports.
There are also efforts underway by FAA to use a variety of new financing mechanisms to help airports make better use of existing funds.
One of these, the State Block Grants program, now underway in nine states, including neighboring Missouri and the Chairman's home state of Tennessee.
This program has been quite successful in aiding smaller airports.
It gives grants to states, rather than individual airports, and let's the State distribute the funds to smaller airports for approved projects.
Another effort is FAA's innovative pilot program.
This was tested with ten airport projects last year.
One of the more popular options under this program is one where the matching requirements for AIP grants can be made flexible, just as they are with highway grants.
Initial results show that this approach also holds promise for smaller airports.
Another possibility that is not currently permitted but comes as the result of our research is funding for a State revolving fund.
This would allow AIP money to be used as seed capital to fund revolving loan programs.
Which in turn could help smaller airports undertake some projects that they otherwise might not be able to do.
We believe this is another option worthy of consideration.
Page 26 PREV PAGE TOP OF DOC Segment 2 Of 3
Thank you, Mr. Chairman. That concludes our statement.
Mr. DUNCAN. Thank you. Mr. Bell.
TESTIMONY OF BAILIS F. BELL, DIRECTOR OF AIRPORTS, WICHITA AIRPORT AUTHORITY
Mr. BELL. Chairman Duncan and Mr. Boswell and the Members of the Committee, my name is Bailis Bell. I am Director of Airports for the Wichita Airport Authority and I welcome you to Wichita, Kansas. I am the first Wichitan to be here before you. Mayor Knight is on the second panel and will give you a more formal welcome to Wichita.
First of all, I want to thank the authorization and appropriations team on the end of the table down here, Mr. Moran and Mr. Tiahrt, for hosting us today and helping us draw attention to some of the needs of Kansas and Kansas airports. I would like to address two things today. Number one is really a capsulization of Dr. Dillingham's remarks as it relates to Kansas. And then secondly, passenger facility charges and the control thereof.
First of all, Kansas needs, at my own airport, Wichita Mid-Continent Airport, we have identified over the next ten years $59 million worth of improvements required. And all of those being eligible for airport improvement program for passenger facility charges. With the current level of funding we are going to have to find $20 million somewhere else and we can perhaps do that if we do long-term bonds, but there will be a shortfall on the requirements for Wichita Mid-Continent Airport in the future.
Perhaps the thing that we don't know about is the environmental considerations, the security considerations and the safety, all challenges that are going to face us in the next ten years. We don't know what that is going to be but we do know one thing, it is going to cost a lot of money.
The rest of the state of Kansas is even in a much more needy situation. There are 87 other airports in Kansas that are identified as eligible for part of omnibus and eligible for AIP funding. They are allocated the great big sum of $5 million a year from the airport improvement program. Of that 5 million, 2 million of it goes to four other commercial service airports in entitlements. So $3 million is left over to be spread among the remaining 83 publicly-owned general aviation and reliever airports and $3 million in the public works business does not go very far, as you folks well know.
Page 27 PREV PAGE TOP OF DOC Segment 2 Of 3
Those general aviation and reliever airports have identified needs of over $88 million in the next ten years. And those are the identified needs that I am sure a lot of folks out there with no hope of gaining any Federal funds have even spoken of or applied for Federal funds. And that $88 million over the next ten years is far above the $30 million that would be available under today's funding moneys.
The second thing I would like to talk about is passenger facility charges. You all have heard about passenger facility charges for a long time. The airport history has pointed out to you the need for infrastructure and improvements at airports over the next decade. And we have heard the gee-whiz numbers that the capacity required will be equivalent to ten new Dallas/Fort Worth airports or 30 larger airports in the United States. That is in the next ten years to take care of the growth in the air travel industry.
All of those needs have been identified and verified and there's been a lot of arguments about how much it is, but whatever it is, there is going to be a tremendous demand for capital to do those things. Of course, the airport industry feels passenger service charges are the best vehicles for accomplishing that and we talked and talked about passenger facility charges and all sorts of other financing vehicles but somebody is going to have to pay for this. And it is going to end up being the consumer. I don't think Congress will be inclined, and I don't think the general public is inclined, to pay for all of the improvements to the airport industry.
For a number of years also we have been talking about an increase in passenger facility charges seeing the future demands. Representatives of the House and Senate have both said to us as airport operators, you must get with the airlines and come in together and we'll consider it. Well, we have had a number of discussions with the airlines and it all boils down to one thing—they all recognize that there is going to be needs in the future as the result of the growth of their industry, but it all boils down to one thing and that is control of the spending.
Page 28 PREV PAGE TOP OF DOC Segment 2 Of 3
The airlines want to control the spending and the airports want to control the spending and they have different approaches or different goals in mind than the airports do. And I think you are all quite familiar with those goals. I have a handout here, Jim, did I have that, do I have that handout? Where did he go?
Mr. PEASE. Is it here?
Mr. BELL. Yes. Very good. It's the regulation deregulation. And there are quite a few changes there and I would like to summarize them for you with four different categories. Since deregulation there have been 25 new entries, four exits, ten bankruptcies and four mergers. And, I am sorry I don't have the list updated, but lines southeast was purchased by Delta last week. And we also understand America West is in play right now. So TWA, by the way, was the only carrier that is here today that started here at the beginning of deregulation. And we now support 11 airlines out of Mid-Continent Airport. The airlines can come and go as they please, and I will be nice about my friends in this industry because that is what I do in my living is support those friends. But it's like apartment tenants, if you please. They come and go and you don't know who is going to be here from one day to the next and the bottom line is, my point is, I don't think it's in the best interest of the community or the traveling public for those temporary tenants to control how we spend our passenger facility charge dollars.
That is the bottom line on the whole thing. Wichita is not unique, there are a number, most airports are just like Wichita's airport in that regard. Only those folks who are hosts to hubs have different situations that are required by the FAA.
And thank you, Mr. Duncan, for letting me go just a half minute further.
Mr. DUNCAN. Go ahead.
Mr. BELL. We are required by the FAA to consult for the airports all AIP and passenger facility charges that are reasonable. The consultation we talk with them and get their input but the final decision, of course, is with the airport owner and operator. And we would like it to remain that way. We, of course, would like an increase in passenger facility charges to help meet the demands of the future. But my point being here is that the control of those expenditures should be with the local airport operator with the guidance of the Federal Aviation Administration. And thank you for your time.
Page 29 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. DUNCAN. Thank you, Mr. Bell. Mr. Rogers.
TESTIMONY OF TIMOTHY F. ROGERS, A.A.E., EXECUTIVE DIRECTOR, SALINA AIRPORT AUTHORITY
Mr. ROGERS. Thank you, Chairman Duncan, Congressman Moran, Congressman Tiahrt, Congressman Hutchinson, Congressman Thune, Congressman Pease, Congressman Boswell and Members of Committee. My name is Tim Rogers. I am the Executive Director for the Salina Airport authority in Salina, Kansas. Federal military business, a little runway about 13,370 feet long, courtesy of the strategic command just to the north 90 miles, a GA airport, nonhub airport with two air carriers. And you will hear about our air carrier situation later on in the second panel probably. I am chairman of the Non Hub/General Aviation Airport Committee of the American Association of Airport Executives. I also served on the Policy Board for AAAE's affiliated organization, the U.S. Contract Tower Association.
Today I will talk to you briefly about contract towers and how contract towers fit into the infrastructure, the needs of small non-hub airports across the country and the value of air traffic control. With that air traffic control at Salina we would not have the type of activity we have. We wouldn't have two of our ATC features on the front page journal because we meet the cross-country military traffic needs to refuel in the middle of the country. Without that contract tower we wouldn't fit into the National air traffic system as we do.
The contract tower program has been in existence since about 1982. If you recall, after the PATCO strike in 1981, the Federal Government started a contract out for air traffic control services with the private sector. It's a very unique program that probably gives you your first glimpse as to how air traffic can be successful.
Right now the 158 airports are in the program. Of all of the Members of the panel today you have at least one airport in your state that is a contract facility. In Kansas there are five. One hundred eighty-six towers are scheduled to be in the contract tower program by the end of 1999.
Page 30 PREV PAGE TOP OF DOC Segment 2 Of 3
There are certainly advantages provided by the contract tower program and most notably are enhanced safety, improved air traffic control services and significant savings to the FAA and the Federal Government. And that is unique. I first, when I first started looking at the program, was made aware that Salina would be brought into the program I really wasn't sure how we would like the program. I wasn't sure of the cost savings.
The average cost to operate a Level I VFR tower by the Federal Aviation Administration is $508,000, versus approximately 253,000 for the cost of privatizing and contracting those services out to the private sector. So there is a significant savings. And the savings to the FAA is estimated to be about $28 million per year for this program.
We found that our users like the program, we polled our corporate users flight training activity at the Kansas State University/Salina, the students, the instructors, they always tell us they prefer the service by the contract service over the former FAA controllers in the past that man the control tower.
1998 was a significant year for the contract tower program. Several positive things occurred. Of prime importance to airports and in the program was the FY 1999 appropriations who funded the program and provided full funding of $47.3 million. And a part of that appropriation last year there was a $6 million appropriation for contract tower cost sharing. Cost sharing is important and it's something that, hopefully, the Committee can continue to look at and Chairman Duncan. And we are especially appreciative of the cost share provisions within the cost sharing program.
It will enable certain towers that fall just below the cost ratio of one to make it have a safety kind of net so they can maybe participate with the Federal Government on a 90/10, 80/20 basis, depending on what the benefit cost ratio is so they can stay in the program without just the shock of dropping out. Sometimes it's just a matter of an adjustment of a year or two shift to bring them back to full funding within the contract of our funding.
Page 31 PREV PAGE TOP OF DOC Segment 2 Of 3
Likewise, we have airports and communities that need to get in to the program. Those communities can use cost sharing as a way to ease into the program and it's a mechanism that can help the transition and really minimize, quite honestly, the political impacts of trying to pull somebody out of the program overnight. And in time they make the transition in or transition out.
In 1998 we also had a significant victory when it came to issues with the controllers union, NATCA, the National Air Traffic Controllers Association. The district court in Cleveland, Ohio did uphold that the program could continue while the FAA continues to do some administrative paperwork to supply to the court to again document the benefits of the program. And that it is to the behest of the Government to contract out with the private sector the air traffic control services.
Also the DOT inspector general's office, U.S. Department of Transportation, did a significant report that you may have all seen already. It highlighted the safety aspects and the quality of the program and pointed out some areas of improvement. But in an interview with AAAE's Aviation News Today program, DOT Inspector General Ken Mead—to summarize the report, the contract tower program is a good program and in the best interests of safety.
In October of 1998 the AAAE and USCTA urged the administrator to take action on a different aspect of contract towers. That, I think, is very important and I wanted to visit with the Committee about it today. Terminal Automated Radar Display and Information System, or TARDIS. This is a means to provide some radar information into the control VFR Level 1 towers, at a very minimal cost off shelf technology. And many airports, Salina included, and Laredo, Texas, have offered to pay for the cost of this equipment and installation costs at no cost to the FAA to install this equipment. It could be very helpful for safety and moving traffic at Level I towers.
Page 32 PREV PAGE TOP OF DOC Segment 2 Of 3
The FAA has had some problems as adopting this as a National program. There are airports that are scheduled for installation of TARDIS, but over 100 are scheduled to be towered airports. The FAA has been urged through the administrator to adopt this through, start us, so this is very cost effective especially where there are airports that are willing to pay for it and can put this equipment into their towers and get the needed radar information into the towers.
Chairman Duncan, thank you for the time and I will be available for questions at the end of the panel. Thank you.
Mr. DUNCAN. Thank you. Thank you very much, Mr. Rogers. Ms. Beatty.
Ms. BEATTY. Thank you, Mr. Chairman, for having the opportunity to be here. And welcome to Kansas.
Mr. DUNCAN. Thank you.
Ms. BEATTY. It's also rewarding to have a Congressman to invite you to a Congressional hearing. And this is my first one. If I stumble, please, I apologize in advance.
Mr. DUNCAN. You will do fine.
Ms. BEATTY. And thank you, Congressman Tiahrt, for being a supporter of aviation and particularly small airports in aviation in the United States.
TESTIMONY OF CHERYL S. BEATTY, CITY MANAGER FOR CITY OF KINGMAN, KINGMAN MUNICIPAL AIRPORT
Ms. BEATTY. First, I would like to give you a review of general aviation in Kansas and share with you the funding issues of small airports that I have run across and others in Kansas have run across.
Page 33 PREV PAGE TOP OF DOC Segment 2 Of 3
There are 243 private airports, three military airports, and 147 public-use airports in Kansas. One hundred thirty-two of those are general aviation airports, of which I belong to, from the Kingman Municipal Airport. They are geographically located to adequately serve the air transportation needs of Kansas. Well, we want to keep it that way so we don't want them to deteriorate, to a point they can no longer be of use.
What people fail to recognize, airports serve a variety of functions and activities; medical, agricultural flying, charter and private air travel, flight lessons, skydiving businesses, business based sites for airplane, radio and aviation repair services, these are all services for small planes themself and are based in small airports that provide a link to the National airport system.
This contributes to the tax base of the economy. A 1997 study estimated that the Kansas airport system had an economic impact in Kansas of $2.3 billion. That does not include the aircraft industry. That is just for the small and commercial airports. The 1997 aviation sales tax alone was $3.2 and $4.2 million to the general fund and income for the state of Kansas.
In 1998 Kansas State University Civil Engineering Department did a study of all public-use airports. They found that the overall current condition of the general-use airport network in Kansas is 48 on a scale of one to 100, 100 being the best. In addition to that, asphalt runway conditions in 65 of the Kansas airports show that 30.7 percent of them are in poor, very poor and failed condition. The airport that I represent is in failed condition.
The aviation plan indicates $108 million for public use improvements is needed in capital improvement. Over $39 million of that is needed to meet critical needs for general aviation airports. The deteriorated conditions of the airports have come about over a 20- to 30-year period. Airport runways continue to deteriorate due to environmental distresses and extreme weather conditions.
Page 34 PREV PAGE TOP OF DOC Segment 2 Of 3
Kansas, like many states across this Nation, are facing funding problems. General aviation airports are dependent on two funding sources, local funds and FAA funds. State funding has been stretched in Kansas, as you heard earlier, Kansas does not have a funding for airports, but the plan is to have $3 million per year for Kansas State funding.
FAA airport improvement funds are limited. FAA funds for Kansas in '94-'96 spent $40 million in capital improvements. Twenty-three public-use airports received those funds. Nine of the 132 general aviation airports received FAA AIP funds with an amount of over $9.7 million which, again, shows a disparity. As earlier discussed, the smaller airports do not receive the appropriate amount based on the number of airports that are being served. The anticipated Federal grant dollars in the future is $2.5 million to $3 million, as you heard. This indicates that there is going to be an extreme shortfall of funds.
Many small airports are rural, very rural, and they need—also do not meet the requirements for FAA funds. As you heard earlier, only 107 of the 137 airports even meet the FAA requirements and those are the ones that need it, mostly for medical services. Airports last year alone in Kansas were eliminated from a list of available landing sites for air ambulances due to the poor conditions of the runway or the length of the runways. This is a tragedy across the entire Nation. And medical services save lives.
Approximately a year ago a doctor in Kansas received a shot in the back from a hunting accident, a very unfortunate accident, but he was air ambulanced out of the small community. That physician now serves seven rural counties as a doctor. That is just one of the many examples why lives are saved by air ambulances out of rural communities and that must be considered in the future for funding of small airports.
Another challenge facing small airports after qualifying and receiving the FAA funds, after it is indicated that they should receive funds in the future is that it is a complicated and lengthy process. It has been known to take up to ten years to receive FAA funds from once you start the process.
Page 35 PREV PAGE TOP OF DOC Segment 2 Of 3
Our airport is in that boat right now. We are on our seventh year of the process. I spoke with another airport just last week, too, and it did take them ten years, ten full years, before they received funding. The rules are numerous and complicated. Many small communities don't have professional managers which means it's even more difficult to wade through the regulations.
The City of Kingman did hire a city manager a few years ago and we moved faster, but if there is nobody assigned specifically to the project then things are complicated and difficult and expensive for small airports to handle.
To give you an example, our airport alone, the Kingman Municipal Airport alone serves 23 base planes and supports four business operations, charter and personal flights, support for local aerial agricultural spray operations, air fuel provider, and we do work with the military. Two weeks ago we had two very large military helicopters make an emergency landing at our airport so we do support the military when needed. And we are linked to the National air system. Twelve years ago our City Commission did appoint an airport board. That airport board worked towards receiving FAA grants.
In 1987 a study did indicate that our airport supports our economy $1.37 million per year and that gives the FAA more incentive to assist us. In '93 we started our master plan. And in '95 we completed our master plan. And in'95 our airport runway was rated 8 points out of 100. It is a failed-condition airport. In '96 the city commission took action because they knew that some day, some day, they may receive FAA funds and increase 1.5 mills to 6 mills so they could assist their own airport and help the community.
In '97 the surface dropped to five points. In 1998 we could no longer wait for FAA funds and increased $23,000 of general fund moneys to repair the airport, just to crack seal and put a surface emulsion on it to stop the rocks from coming up out of the runway. That may seem like a small investment for some but $23,000, when you know it's just a band aid fix, is a difficult thing to swallow out of the commission budget.
Page 36 PREV PAGE TOP OF DOC Segment 2 Of 3
In addition, we are moving forward with land acquisition for the airport because the FAA has indicated that we need to do this step in order to ensure the funding for the future. That will come at a cost of 20 to $30,000 for those professional services to move forward and plan acquisition.
It's unfortunate that the rules are so complicated, that small cities do not have the time or the professional talent to move forward in just purchasing the land to extend the runway. I also believe that small airports have a difficult time dealing with the complicated FAA rules as many of our colleagues do. Administrative staff, and without such staff even longer delays are expected, I mention this because small airports do not have the staff to move a project forward. With the complicated, process these components come with our personal experience working with small airports. They provide a greater transportation network. Your leadership to provide much needed infrastructure funds and willingness would help. With this a challenge, I believe, is developing a flexible and innovative program that will help small general aviation airports and, of course, increasing the funding so we can move forward with these very expensive projects.
Thank you for the opportunity to speak today.
Mr. DUNCAN. Thank you very much, Ms. Beatty. Mr. Reed.
TESTIMONY OF BYRON ''SKIP'' REED, CHIEF PILOT, ZACHRY CONSTRUCTION COMPANY, ON BEHALF OF THE NATIONAL BUSINESS AVIATION ASSOCIATION, INC.
Mr. REED. Thank you, Chairman Duncan. My name is Skip Reed, and I am chief pilot for Zachry Construction Company located in San Antonio, Texas. The company's been in business for 75 years. We had a flight department for 52 of those years. I have been there for 28 years. And during those 28 years I have seen firsthand many of the challenges facing small airports across the country.
Page 37 PREV PAGE TOP OF DOC Segment 2 Of 3
In the past two weeks I have flown employees to Temecula, California; Batesville, Mississippi; Crawfordsville, Indiana; Borger, Texas; De Ridder, Louisiana; and Granite Falls, Minnesota. And my dispatcher tells me if I wasn't here I would be in Blytheville, Arkansas.
My experiences are not unlike many other business aviation pilots and today I offer my testimony on behalf the National Business Aviation Association and its nearly 6,000 member companies. NBAA member companies rely on small general aviation airports around rural areas and we are absolutely committed to working with all of you in tackling the issues identified here today.
As you all know, and I kind of feel like I am talking to Noah about a flood, so bear with me. Airports like McGhee-Tyson; Hutchinson Municipal; Boone County; Purdue University; Ottumwa Industrial, that one I haven't been to, I will have to get to that one; Aberdeen Regional; Mid-Continent and Deming Municipal in my home state of New Mexico, don't have the notoriety of Chicago O'Hare or DFW, but yet they are the critical link between Main Street and global economy. I don't want to belabor the benefit the small airports and medium sized airports provide to America or we wouldn't be here today. But I would like to give you some thoughts as I see it.
As I see it, the most pressing concern at small airports and medium sized airports throughout the country is gaining adequate funding for airport development. Although most smaller facilities do an adequate job of making due with tight budgets, it is clear that some needs remain unmet.
What I have found is most of these airports were built in the middle '40's and they just simply need to be fixed up. They need money in the infrastructure. And they were built to accommodate airplanes of that era, stagger wings, Cessna 125 and the like, and we have a sophisticated sequence. We are the global economy and we are slowing everything down. Time has value.
Page 38 PREV PAGE TOP OF DOC Segment 2 Of 3
The fact is, in Wichita they have done a wonderful job making airplanes land as short as they can yet go as fast as they can, but we need some help on the airport side. There are airports that we would like to go in to that we can't and it really hurts the economy of that rural area.
And I would like to consider the example of the Castroville Municipal Airport in Castroville, Texas. They had a 5,000-foot runway. They didn't have enough money. The runway was crumbling. They put in a substantially shorter and narrower runway than they had before and that is one that excluded a lot of turbine operators that could have used the airport and the tax base, certainly. I am glad to know that this subcommittee is working to address the problem by taking steps to unlock the airport aviation trust fund.
I have a little anecdote. I guess about three days ago I was sitting in a 150 noise study group in San Antonio. That is where you have all the airport neighbors come in and complain about the noise, so they are not exactly friends of the airport. And during that process we got to talking about the airport trust fund. And when it was explained what was happening to the person, they were all flabbergasted and that is to put it nicely. They just couldn't believe that that money was not being spent for what it was intended to in 1970. Now, you have to realize these were not friends of the airport that did that and I have to admit it was a nice diversion, they didn't complain about the noise so much.
Your efforts are not only common sense, they all produce real benefits to the airport. I hope, however, that you will not let the progress you make in this increased funding be offset in other quarters to close airports or limit their access.
In the National system it's kind of like real estate. Access, access, access. It doesn't matter whether you are being restrained economically or by regulations it is important that we have, we now have the best air transportation system in the world, and I know because we fly outside of the United States and we have been to some very civilized countries that don't have the infrastructure. And I just can't emphasize, if we don't take care of the infrastructure it's really going to set us back. And I guess, if you will just grant me another couple of seconds here.
Page 39 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. DUNCAN. Go ahead.
Mr. REED. When we give airport grants, a deal is a deal, a commitment is a commitment. And I really worry that when we start closing airports like Mission, and it's due to close, that we are not honoring that commitment. And it is the taxpayers or the tax money that we are putting in there. And if they are not going to honor it, they need to give it back or keep it open. And I know that everybody is working on that issue.
Mr. Chairman, I know that you are going to Burbank here before long and we wish you good luck on that. And the association will do anything we can to help with that situation out there. I do appreciate your time.
Mr. DUNCAN. Well, thank you very much, Mr. Reed. And all of you have been very helpful. And, you know, the situation I think is this, with the computers and Internet and the fax machines and all the tools we have available today, most businesses, or many businesses really don't need to be in the big cities where they needed to be years ago. And I think many of these businesses would move to some of these small towns and rural areas but they won't move there without good air service.
And you talk about the medical. If we don't have good air service you don't get people, and if you don't have people you don't get doctors, and if you don't have doctors you don't have hospitals, I mean, it's just a cycle. But we heard testimony just a few days ago in our FAA hearing that over the past 25 years that the number of small general aviation had climbed from 680 to 5,000 and that that trend is still continuing. And then the administration has just proposed an almost 20 percent decrease in funding in the airport improvement program from about 1.95 billion to 1.6 billion and the elimination of the general fund contribution which, last year was $1.42 billion.
So the problem we are in to at the very time is that all of—and it's politically, really it's politically impossible to build new airports basically especially of any larger size. So it seems that we have got to improve or repair or expand the airports that we have. And my own personal feeling is we should stop sending all of these billions and billions in to Bosnia and all the other places and start spending on some of the needs we have here in this country.
Page 40 PREV PAGE TOP OF DOC Segment 2 Of 3
Let me ask a couple of questions. Mr. Bell, was Dr. Dillingham correct when he said that you received $2 billion?
Mr. BELL. Thank you very much.
Mr. DUNCAN. I get so used to saying billion, Everett Dirksen once said a billion here and billion there and pretty soon it adds up to some real money. You receive 2 million a year PFC?
Mr. BELL. 1.6 million, yes, 1.6 million. It doesn't ever work out to a 100 percent of the departure because of the limitation on the four times on the ticket.
Mr. DUNCAN. Right.
Mr. BELL. And PFCs, that is what we receive. And about 250 now from Government entitlement and 1.7 from passenger entitlements.
Mr. DUNCAN. Over the last, let's say over the last five years, how much have you received from AIP funds, rough guess?
Mr. BELL. Roughly $7 million.
Mr. DUNCAN. Seven million?
Mr. BELL. Yes. There have been situations where we needed large amounts of money for major runway improvements and have been very, very fortunate to receive some discretionary funds to help out.
Mr. DUNCAN. What do you think the affect would be on airports like yours if we reduced the AIP fund by 20 percent or more? Would it have an affect?
Mr. BELL. It most certainly would. It would cause landing fees to go up and general aviation fees to go up to meet the needs of the airport which perhaps make us. We are competing with all the rest of the airports in the United States. It would be difficult to do that, as you are pointing out, as the administration is proposing that right now. And I don't know that, at Mid-Continent, I don't know that it would stop any projects. It would just force the local community to come up with the money through other fees and charges to take care of the business. But as far as the smaller airport, if you don't mind my——
Page 41 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. DUNCAN. Go ahead.
Mr. BELL. As Dr. Dillingham reported, as far as the smaller airports are concerned it would have a significant affect on that. In fact, that hurts the smaller airports more than it does the larger airports.
Mr. DUNCAN. Mr. Rogers, in your written testimony about the contract tower program, you say that the private operator can run Level I private for about 50 percent of what it costs the FAA. Why is that?
Mr. ROGERS. The significant reason is the staffing where Salina was an FAA-operated tower, FAA controllers, the staffing was anywhere from two to three times higher as far as the number of controllers that were on duty at one time or in the facility and generally on the payroll. So the private contractor will go in and reassess the traffic levels and will put the staffing level more appropriate for the size of the airport and for the traffic that is being handled at that particular airport and that is the primary reason.
Some of the wage rates are a bit lower, but they are still a Federal wage determination made for each facility. So that tends to keep the basic wage rate up. And some of the benefits may be different from the private contractor and may not be as extensive as may be a Federal package of benefits.
For the case in Salina, out of five controllers four are all former FAA. They don't like me describing it this way, but between them they have about 110 years of experience between the four of them. They are all retired FAA. Three of them are former tower managers. So their experience level is just exceptional and they want to live in the Central Kansas area and it's affective and they are still young individuals. They still have—this gives them a way to continue their air traffic control through the private contracting process.
Mr. DUNCAN. Well, I am glad that you pointed out or tried to point out in your testimony the importance of the contract tower program. And it's a program that I have supported and, I think, another important piece in this attempt to try to expand or help the smaller airports.
Page 42 PREV PAGE TOP OF DOC Segment 2 Of 3
Last Thursday at lunch we ate with a man from Brazil who is the head of Embraer. And he told—he had a very interesting statistic. He said Embraer privatized in December of 1994, just a relatively short time ago, and that they were producing about $60,000 per employee. Today they are producing about $240,000 per employee, six times as much in that short period of time.
I will move with that to Mr. Boswell because we need to move on to these questions.
Mr. BOSWELL. Mr. Reed, your discussion about AIP funds being increased from the current level, to reflect the importance of small airports——
Mr. REED. Yes, sir.
Mr. BOSWELL. —what single thing would you do to help small airports? What do you want?
Mr. REED. I guess it is not so much a question of what we would do, but how we would do it, because clearly what is needed is more funds for these smaller airports. And I think where we come down is that not only do smaller airports need more funds, and that could be a judgment in AIP, but we also wanted to point out we have a National system and we want to maintain that integrity of the National system. So whatever we do for smaller or larger airports, we have to make sure that we still can sort of keep even in that capacity, for both types of airports to raise the funds that they need.
Mr. BOSWELL. Mr. Bell, any comment on that?
Mr. BELL. Thank you, yes, sir. I would recommend that you lift the cap on passenger facility charges, is that a surprise? But as Dr. Dillingham points out, and as the AIP or the fund is set up, the program is set up, that, of course, would allow the larger airports to give up entitlement money that goes back to smaller airports. And that is a win-win deal for everybody. It's a win-win deal for the airport and a win-win deal for the customers and allows the airport system in the United States to grow and meet the needs of the future. Thank you for asking.
Page 43 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. BOSWELL. Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Mr. Boswell. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you. Perhaps this is generally directed to the entire panel, and particularly Ms. Beatty, you indicated the criteria for small airports. What should those criteria be, which airports should be able to access AIP funds?
Ms. BEATTY. I don't know where 20 became the magic number, to have 20 based planes, but there are a number of real airports that have 10 to 15 based planes and they don't qualify, generally qualify, for AIP funds. But I would think there would be some kind of criteria that would be put in to place if they had ambulance service or met medical needs or strong needs of the economy, that there could be some fluctuation in the program.
A certain percentage would go to the very, very small airports across the Nation. And I don't know what that magic percentage is either, because I don't know the total picture for the budget of the entire Nation, but very rural airports, and we are talking about 500 to 1,000 people, but yet that airport is the absolute critical function for medical services and business functions for that community and they don't receive funding. And their only hope is to have only their local residents when it serves the entire state.
Mr. MORAN. Mr. Rogers, or anybody else on the panel, Mr. Bell?
Mr. BELL. I just want to mention we have that chicken-and-egg problem all over the place. Where, if you want to have more, if you want more pavement to handle more aircraft you have to have more aircraft to get the pavement. Do you understand what I am saying, or instrument landing system. You have to have a whole bunch of instrument landing in order to get it. And it's a chicken-and-egg problem. We realize the FAA has to draw the line somewhere, but I think that is what Cheryl is talking about there.
Mr. DILLINGHAM. I think as things currently stand I think the State can nominiate which airports are a part of the NPIAS (National Plan for Integral Airport Systems). And I think what we heard this morning is Kansas is thinking about ways to fund smaller airports and make airport funds more available. So I think those interested airports or interested parties should indeed go to the State and explain some of the issues that have been raised today about economic development, medical services and the like, and try to make sure that the State Legislature understands the urgency of putting whatever airports they desire into the NPIAS.
Page 44 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. MORAN. We do have the Director of Aviation, Kansas Department of Transportation, in the audience. So part of that, I assume, is being received. Again, perhaps Ms. Beatty has examples of unnecessary hurdles. You talked about seven years, I know a community that is taking ten. What are the examples of the things you think that are just crazy that you have got to do in order to get through the process?
Ms. BEATTY. Mind you, even though we are seven years, we are at the very beginning process. All we have been able to get through is the master plan and starting the land acquisition. And we have a land acquisition book that we have to go through. And without someone of professional services who can handle that, I don't have an engineer or secretarial staff to give me the time available to free myself up. I don't have professional services and staffing to wade through these manuals and make sure it's done right so we can participate in the FAA procedures.
Land acquisition, for most all communities, would be talking to Joe and say I will give you a fair price for your land and will you sell it to me. But that is not what you do. You have to get through this manual in order to buy land to expand your airport. And that means for the larger airports that have commercial staff and smaller airports just don't have that.
Mr. MORAN. I am worried my time is about to expire. Would any of you think the concept of rents to states and then apparently airports applying to, in our case, officials in Topeka for access of those funds would make more sense than the process you go through currently?
Mr. ROGERS. Some of my peers may fall out of their chairs when they hear this statement coming from me, but I am coming around to the point of view, the Block To Grant Federal Grant can help the State to meet the needs of small GA airports. If that Block Grant Program is tailored, we talked to legislature about leveraging Federal funds well before you. And the aviation subcommittee and Members of Congress I would ask that you be concerned about how the Federal leverage the State funds to help address the same issues, as legislators, you have in common with the State Legislators across the Nation.
Page 45 PREV PAGE TOP OF DOC Segment 2 Of 3
That is if the Federal Aviation Administration would be directed to work closely with the State aviation to help package grants and fund projects to help the smaller GA airports, some of the restrictions lifted of how to develop runways and simplify the process and make it more accessible. I think you could go a long way in addressing the needs. And through that Block To Grant program, and I am beginning to think more and more that is one of the avenues that you could look at to help get funds and get more bang for the buck, so to speak, by working with the State aviation officials.
Mr. MORAN. Do you think that would be true, Tim, for the size of the airport of yours?
Mr. ROGERS. I am speaking from my motive, smaller airports.
Mr. MORAN. Thank you very much.
Mr. DUNCAN. Thank you. And, Mr. Pease.
Mr. PEASE. Dr. Dillingham, you advised that approximately half of the smaller airports currently collect PFCs. Can you explain the reasons that would persuade an airport to make a decision for or against collecting the PFC?
Mr. DILLINGHAM. I can explain some of the reasons. I think some of them have been mentioned here. There is a lot of administrative things that one has to go through in order to get permission or approval for PFC. And oftentimes, if you think about a real small airport it may not be worth their time and effort and the expense that they would have to go through, as was indicated, in getting professional help to even make the application process to FAA.
Mr. PEASE. Maybe some of the folks who have dealt with this I should direct that question to. Are either of you collecting PFCs?
Mr. ROGERS. No.
Ms. BEATTY. No.
Page 46 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. PEASE. What went into your decision?
Mr. ROGERS. For Kingman it is in passenger airplane and scheduled air service. For Salina, it is not worth the time or effort for the number of claims that we had, 13,000 for claims. And at that level it is not worth the cost and effort. There are benefits not there because of this extremely bureaucratic process to go through to access the funds. And Mr. Bell may have a better view, as far as from his point of view, on the small hub airport.
Mr. PEASE. Thank you. Go ahead.
Mr. BELL. Well, if I recall correctly, when we initiated it would cost us $10,000 just for a consultant to just go through the first application and then our own staff has done the follow-up applications. It does take significant accounting system within your own airport just to keep up with the daily flow of passenger facility charges, checks from all over the world come in as the result of that. I don't know, I can't speak for the real small airports, but a $3 passenger facility charge is a relatively insignificant charge compared to the ticket itself. But I know there is a possibility some airlines say you charged a $3 passenger facility charge. We are not going to do business. And the community believes them so they don't charge them.
Mr. DUNCAN. Let me apologize. Because of time constraints we can only spend five or six more minutes with this panel. And if you don't mind, I would like to go to Congressman Tiahrt. And keep your answers as short as possible.
Mr. TIAHRT. Thank you, Mr. Chairman. There are just a couple of things. I would like to reinforce Mr. Dillingham's comparison between large and medium sized airports. And Mr. Bell and Mr. Rogers were kind enough to mention the problems with the small airports, especially paperwork. Kingman County, Ms. Beatty is aggressive to try to go through this and obtain AIP funding. Most of these smaller airports don't have anyone to do this work. They just have a city council. And they are already making a living to make ends meet. That is why I advocate State grants. And I think the needs of Kansas will be much more easily dealt with than having a one-size-fits-all system. It obviously doesn't fit small airports.
Page 47 PREV PAGE TOP OF DOC Segment 2 Of 3
I want to emphasize that and, Ms. Beatty, if there is one thing that she would say for, and I know we have had the conversation before, a small airport, the one thing that makes it more difficult to overcome what would be the biggest hurdle to overcome?
Ms. BEATTY. The biggest hurdle for small airports to overcome is the process, the process for the funding. The small towns have such great needs, not only in airports, waste water and all the other things. And the small airports end up last on the list because they are forced to follow the Clean Air Act and Water Act and all the things that are done in a community. But we need a program that is simpler and flexible so that an average person can understand what is being put before them without having to hire an engineer or consultant to walk through the grant program. This is, like I said, is just the first step and we know we have a lot more documentation facing us. And this first step alone is going to cost us 20 or $30,000.
Mr. TIAHRT. Thank you. I think the panel did an excellent job and I appreciate the opportunity to try to simplify the system by giving airports more flexibility and by trying to focus on local solutions for the problems they are facing.
Mr. DUNCAN. Thank you very much, Mr. Tiahrt. Member Hutchinson.
Mr. HUTCHINSON. Thank you, Mr. Chairman. Let me follow up. Mr. Rogers, you indicated that 13,000 in claims does not justify a PFC. At what level does it become cost effective?
Mr. ROGERS. If our claims continue to grow we'll probably be looking at that, if we could get to 15 to 20,000 in my estimation. I was told by the board of directors, we reviewed the process again this year and make a determination. We do have passengers that are paying upwards of 6 to $12 based on round-trip travel, going to other hub airports because of the four segment——
Mr. HUTCHINSON. You are losing money?
Page 48 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. ROGERS. That is correct. It has to be cost effective. I go back to my board of directors of five people. I have to make it, I don't want to spend 20 to get 13, something like that, they don't like that. And they tell me to go back and try again.
Mr. HUTCHINSON. Let me go along here. Mr. Bell, you talked about involving the airlines to control the spending of the PFC money. Are you talking about the future? Right now you mentioned consultation. Is anything else required in that regard?
Mr. BELL. Thank you for asking. I am talking about the future. And, as you know, the airlines is very much interested in controlling and development of airplanes and they do so in many places.
Mr. HUTCHINSON. So you don't want it to go beyond consultation?
Mr. BELL. That is correct. Consultation works just fine.
Mr. HUTCHINSON. Final question. If we raise the authority of the PFC so that you have the option of going up, what would be the impact on consumer travel? I want to ask Mr. Bell and Mr. Dillingham that.
Mr. BELL. That is a pricing elasticity question, I think. There has been no evidence, that I have seen, that the implementation of a passenger charge makes any difference on any consumer buying any ticket anywhere, any time. Thank you.
Mr. DILLINGHAM. Member Hutchinson, I guess I can sort of echo what Mr. Bell said and point to another example. When we were asking airline passengers would they be willing to pay some extra money for security when we were upgrading security a year or so ago, and the overall, overwhelmingly people were saying of course they wouldn't mind paying an extra dollar or two. I think in this case personally in times that we are living in now, that as long as passengers were getting quality service and getting the kind of service that they are looking for, I don't think that we would lose a lot of airline passengers.
Page 49 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. HUTCHINSON. Who opposes raising the PFC? Do the airlines?
Mr. DILLINGHAM. Yes.
Mr. DUNCAN. Member Thune.
Mr. THUNE. Yes. I think the thing that I am taking away from this panel is sort of what I already believe, is that the Federal red tape is an abomination and really an insult to right-thinking Americans when you are forced to go through something like that to be eligible for this program.
Just a couple of questions quickly here, Mr. Chairman, because I know you want to move along. But I am sort of curious, in my state of South Dakota, for example, in Rapid City, we pay about $8 million a year in the tax that passengers pay for flying. Sioux Falls $9 million. Rapid City gets back $800 million under the formula or Sioux Falls gets about 1.3 million. Rapid City gets 800,000 in entitlement. Mr. Dillingham, are there donor relationships, are all of us donors under this deal, are there some operators doing better?
Mr. DILLINGHAM. If you don't mind, I will let Mr. Aussendorf answer that.
Mr. Aussendorf. Besides the airport improvement grants that go to the airports that are funded from the ticket excise and segment taxes, these taxes also pay for operating air traffic control. AIP represents only a portion of the ticket tax. So if you are only looking at the grant money that is coming back to the airport individually, yes, all airports generally are donors under that arrangement. But the whole country benefits, the whole national air system benefits from air traffic control and safety structure of the system. So there is also all of those funding costs that come out of the ticket taxes.
Mr. THUNE. That was my assumption but I wanted to make sure South Dakota wasn't getting fair changed and Kansas was cutting a fat hog. Just joking. The private contracting on the tower, are those towers when you used private contractors, are they open 24 hours or does the tower then——
Page 50 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. ROGERS. No, that is another area of reducing costs is to go in and look at the hours that the tower should be operated. For example, Salina is operated 7:00 a.m. To 9:00 p.m. Local time, seven days a week, 365 days a year. Other airports may need to have longer or shorter hours, and as part of the process and contract tower program, also gets more participation from the users from the contract tower program. So it is tailored to the actual needs of that airport instead of one size fits all. We are a contract tower program, when we have a major program or event, the National Intercollegiate Flying Association will have an event this coming year, we can extend the hours as necessary. The military comes in and uses the airport for training exercise. We can contract with the contractor to extend the hours to meet the needs of the military unit. We can build that into our fees for the military unit to use the airfield and be more flexible that way.
Mr. THUNE. One final comment. One thing that is really cramping my style right now is the 9-by–14 box that you have to get your luggage through at the airports. But I understand that is something that is being instituted on a national basis. So, thank you for your excellent testimony and insights. Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you, Mr. Thune. And, Mr. Tiahrt, I will tell you a little over two years ago on the FAA bill Tennessee is one of the two states added to the State Block Grant Program. And it's been a very popular and successful thing in our state and it's something that you might want to look at.
We would like to spend a lot more time with you but we have to move on to this second panel. So thank you very much for being with us. Thank you very much.
Mr. DUNCAN. On our second panel we have The Honorable Bob Knight, Mayor, City of Wichita, Kansas; Mr. F. Tim Witsman, President, Wichita Chamber of Commerce and Chief Executive Officer of the Kansas World Trade Center; Mr. Lavern D. Squier, Executive Director, Ellis County Coalition for Economic Development, Chairman, Fly Hays Promotions Committee and Facilitator of the Western Kansas Communities for Air Service; and Mr. Ken Black, Airport Director, Manhattan Regional Airport.
Page 51 PREV PAGE TOP OF DOC Segment 2 Of 3
Gentlemen, we are pleased to have all four of you with us and we are pleased to have it listed on the call of the hearing. And, Mayor Knight, it's an honor to be with you and in your city. And thank you for coming to be with us today.
TESTIMONY OF BOB KNIGHT, MAYOR, CITY OF WICHITA, KANSAS
Mr. KNIGHT. Thank you, Mr. Chairman, distinguished Committee. My name is Bob Knight and I am Mayor of the City of Wichita and we genuinely appreciate all of you being here today to discuss aviation issues. I do want to point out to Congressman Hutchinson, we are right by the Arkansas River and we are just north of Arkansas City, Kansas. And I hope you feel right at home.
Mr. HUTCHINSON. Close to it.
Mr. KNIGHT. That is the best we could do for you. I want to thank you, Congressman Moran, obviously, for choosing Wichita for this meeting and also, once again, express my appreciation for the distinguished service that my friend, Todd Tiahrt, gives to this district.
For the benefit of the panel, Wichita is a city of 325,000 citizens located in a metropolitan area of a half million Kansans. The market area for Wichita Mid-Continent Airport is approximately 900,000 people in Kansas and Northern Oklahoma.
Our community is fortunate to have numerous businesses which make a strong contribution to the global economy. The largest of those have been mentioned, I think at least in part is Boeing, Cessna, Raytheon Aircraft, Learjet, The Coleman Company, Koch Industries and McConnell Air Force Base.
This community and South Central Kansas are poised to enter the new millennium with a strong economic position and extreme economic workforce.
Page 52 PREV PAGE TOP OF DOC Segment 2 Of 3
As Mayor of this city I am continuing to work with others to make the Wichita community even stronger. We know and understand that good and reasonably priced air service to our community is essential in maintaining a strong economic base and sustain continued growth.
Deregulation of the airlines has worked somewhat for the betterment of air service in our community. Wichita Mid-Continent Airport does host eleven airlines serving ten hubs. Half of the 1.4 million passengers using Mid-Continent do experience non-stop service to and from their destinations.
In the current environment, we are relatively pleased with the level of service. What we cannot understand or accept is the reasoning behind the airlines charging what is perceived to be exorbitant fares to a good portion of the users at Mid-Continent Airport.
As Mayor, I have approved and appointed a group of community leaders to gather and put forth their collective wisdom and input to address the pricing practices which cause approximately 400,000 passengers per year to drive to airports in neighboring states. You only have to look at the second chart in the attached testimony to see why, for the dramatically lower air fares in Kansas City and Oklahoma City and Tulsa.
As our passenger numbers continue to decline, we must make every effort to seek reasonably priced air service. Let us be clear, deregulated does not mean unregulated. By virtue of their control at landing slots at hubs existing airlines do function as quasi monopolies. Start-up airline services are at a distinct disadvantage, offering communities such as Wichita competitive fares and service at hubs, airlines must compete more and lower fares reflect that competition. In cities like Wichita, cities do not feel the same need for compensation and control ticket prices. In Wichita we have witnessed the phenomenon of major airlines lowering prices only long enough to drive out new airlines and then raise the ticket prices back up. Call it what you will, but the air service market in Wichita does have an element of price fixing to it.
Page 53 PREV PAGE TOP OF DOC Segment 2 Of 3
The United States Government does have a role ensuring the predatory business practices are not permissible in the only partially deregulated air service marketplace.
There are several things that I believe the United States Congress could do to help make sure communities of our size are offered affordable air service. One is, and it's been mentioned, review the Federal Government's restrictions to Dallas-Love Field to make sure the restrictions currently in place are currently consistent with the deregulated market.
Second, as the airline industry continues to consolidate, cause all transactions to meet the test of being designed to be in the best interest of the traveling public.
And, finally, to continue to support strongly the development and growth of the Nation's airport and air traffic control system. Our community would be pleased to have a choice of nonstop air service to Chicago's O'Hare Airport, but find that the capacity constraints prevent that from occurring.
Thank you, Mr. Chairman.
Mr. DUNCAN. Thank you very much, Mayor Knight. Mr. Witsman.
TESTIMONY OF F. TIM WITSMAN, PRESIDENT, WICHITA AREA CHAMBER OF COMMERCE AND CEO OF THE KANSAS WORLD TRADE CENTER
Mr. WITSMAN. Chairman Duncan and Congressmen Tiahrt and Moran, Boswell, Pease. I do believe you do represent a district where I went to college, Purdue.
Mr. PEASE. Indeed, a great university.
Mr. WITSMAN. Absolutely. I am the Wichita Chamber of Commerce President, Tim Witsman. And I am not going to repeat what our Mayor has explained. Let me see, from the business side we are not in favor of regulation so I am not going to argue for reregulation. In fact, I am not sure if there is another city in the country that has been hurt worse than we have. And that is by bad regulation and bad legislation and the Wright Amendment that allowed the Southwest system to build up around us and allow the other systems to have advantages. We have competitive disadvantages.
Page 54 PREV PAGE TOP OF DOC Segment 2 Of 3
It's now tough to get back in the game because they have built their system and we are competing with the other cities. If you want to ask the Metropolitan Planning Department what was the most negative thing they could think about Wichita it was the air fare. And, again, as the Mayor said, not service but fares.
The Chamber did a survey of small and medium sized services and asked what is going on. They did go to other markets and found out that even when they have a meeting with the other companies they do it at Kansas City or other places because it's cheaper to do it that way. This is a big disadvantage. We have had several companies leave that they claim the major reason is air service. I am not completely convinced. More cases it has to do with CEO's home is, but it's a problem. We had discount service in Wichita a number of times and each time the majors have met that price and the discount carrier has gone out of business or left Wichita.
That by and of itself wouldn't consider to be totally damning but in that business there were 45 new entrants between 1978 and 1993 into the airline industries. Two of them survived. Since 1993 there was only one that appears on sound footing and there were about two or three others that may make it, we'll see.
So the real question is, what can you do. And, again, I say we are very leery of legislation since it impacted us so negatively. I look at, and I hate to get into the law because I am sure somewhere on this panel there is an attorney that will bring me up short, but looking at antitrust there are two standards, as I understand it, on predatory pricing. One is you can't price below your actual cost, that is one test. And the other test is recoupment once you drive out your competition. Now how long does it take to recover, in essence, what's the long-term cost to the consumer?
Let us give an example from two routes that we have. On route A and B, I think it is the case that the majors definitely reduced their cost below that of what their actual cost was, reduced their cost below their actual cost. It would take a study to find some of this out, and I really would recommend to both the panel and FAA and DOT to do some studies of this. The second test about how long it took the company to recoup, I think there are a two differences between those two routes.
Page 55 PREV PAGE TOP OF DOC Segment 2 Of 3
On the first route we had two majors and the discount carrier. When the discount carrier went away it did go up. It didn't go up terribly and my suspicion is it will take a long time to recoup that money.
It may not on the other route. There is no question we have had the largest percentage increases than any city in the United States in 1998 or air prices. One of those was on our routes to Denver and the other one was to Chicago. My suspicion is that on that second route it has failed both tests. So that if one were to get in to either rule making or legislation, then I think some good evidence of some other places where this thing has happened would help guide that.
And it may be the case that if there are still two carriers after the one is driven out, that the competition does exist. But I would suspect in the overwhelming majority where existing airline drives out and becomes the only one, you will find that it is noncompetitive and probably predatory pricing.
We are very supportive of your efforts in the infrastructure area and once in awhile we get chastised for, the Chamber of Commerce, for spending money in airports and on highways. And the yes or no is, yes, the Chamber of Commerce are growth organizations. We are not a tax protest group. We would like you to hold down the operating costs. Evan Smith said, basically what the government does well we believe in the proper use of the trust funds and we don't like it when it's misused or used for other purposes, highway trust funds or aviation trust funds, it is in the long-term interest in the country and, frankly, Wichita to build the best system you can because increasing the capacity would, frankly, help communities of our size. And I would be happy to answer any questions later.
TESTIMONY OF LAVERN D. SQUIER, EXECUTIVE DIRECTOR, ELLIS COUNTY COALITION FOR ECONOMIC DEVELOPMENT, CHAIRMAN, FLY HAYS PROMOTIONS COMMITTEE, FACILITATOR, WESTERN KANSAS COMMUNITIES FOR AIR SERVICE
Page 56 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. DUNCAN. Thank you Mr. Witsman. Mr. Squier.
Mr. SQUIER. Thank you, Mr. Chairman and Committee Members. Thank you for giving us this opportunity. Mr. Moran, being from our hometown, thank you, for making this arrangement. If it's all right, I will use some of the slide information with us here. Essential Air Services Program it has meant a great deal to us over the last year, however, many aspects have been challenging to deal with. The various stop/start cycles have been problematic, to say the least. This Beech 1900 is the workhorse of the program. As you look across Western Kansas and Colorado, in the parties that I am familiar with, the air service, economic development and the importance of it, of air service, to economic development as it relates to the economic vitality of the Western Kansas community, and Central Kansas communities across the state for that matter, certainly, that is the case in our situation, the communities that I am most familiar with, the businesses that we have in our communities mentioned also help our industries and so forth, are exceedingly important to us.
In our community of Hays, Kansas, the medical center's growth is paramount to the success of our community. They are undergoing a $30 million expansion, retaining and recruiting positions all the time. And the air service system, the commercial air service system, can bring in training and expertise that we need in the medical center and outbound basis is very essential to us.
The next slide will show the number of communities that are involved in the EAS service area in Western Kansas. If you click one more you will see communities first to Denver as part of the EAS structure. And, once again, the cities to the east, if you click again, and let me mention here the DIA service structure accomplish to the great application and Air Midwest based here in Wichita serves the Kansas City marketplace with U.S. Airways Express service. Salina, Kansas is not in the EAS service contract per se, but enjoys service to DIA as the result of the linkage.
Page 57 PREV PAGE TOP OF DOC Segment 2 Of 3
Another EAS community and service to the eastbound side again to the U.S. Airways Express. The stop/start change cycles have been problematic to the community in a number of ways. If you notice, in 1993 our annual boarding numbers were significantly lower than they were in 1998. In these ensuing years between '93 and '92 we have had situations where we have changed carriers, we had to drop hubs, we had to change a number of flights that were allowed per the contract language and the essential air service program. All of this shakes up and destabilizes consumer confidence. This is problematic for the communities.
Our real role is not prior DOT responsibility but to promote, or our only venue is to promote the air service and try to attract users to that again. We don't control the rates or frequencies, et cetera, but we, again, as many communities spent thousands of dollars trying to promote and make our traveling public aware of the service that is available. The trend, though, is geared toward larger aircraft.
The 30-passenger airplanes is a coming thing, if you will, and the market place's 19-seater that we enjoy service with is really, again, going to be our future for some time to come. Regional jet service is also a thing that is going to be, I guess, the future for the regional carriers as they look to grow their services and then probably, again, not discontinued for us at this point in time.
That does, however, devote our attention for what is available for the Western Kansas communities and that is increased investment by the regional carrier by the type of carriers. They are more interested in investing in that larger aircraft or jet service. All of this is to lead incentive to grow or change and this shows the bar chart shown, but the growth you are seeing accomplished is, by and large, community promotions activity and/or willingness to further enhance their own destiny.
The yellow line indicates a line that is accomplished, again, by the tie-in through DIA. Absent that tie-in, they would not be at that point. If I look at DIA/KCA service splits, Hays and Garden City and Salina, non-DIA communities may achieve increases through promotionals as the result of those splits against the Western as the result of under the label of United Express Great Lakes and eastbound service, Air Midwest. But nonetheless, we have again our traveling public.
Page 58 PREV PAGE TOP OF DOC Segment 2 Of 3
If we kept or cut out one of these services, as has been the history of DIA service practice, it takes a great time to move from that would-be destination to another. We need to maintain an available, affordable and predictable service program. And as part of that we have this situation in the past. DOT has contracted with the regional carrier, whoever that air carrier was at that point in time, to provide that service and that was fine and good except we were missing a couple of parties to the transaction. The major carrier, we have seen firsthand, the impact major carrier and regional carrier as the result of the United and MESA struggle in DIA. This, in the last year, plus that situation really showed that the major carrier has to endorse and be part of the program, if you will, as it relates to the regional carrier's pricing and service delivery program. If the major carrier does not sign on, things will quickly fall apart in this situation.
There is another partner and that is the community, it has to be part of this and currently has not been.
And in closing, it is our advocacy on behalf of the Western Kansas communities and so forth, to promote the community being part of this transaction because, after all, the service picture to deliver service to those communities is for their benefit and they should be part of the program as it is developed, finding out who the carrier is, et cetera.
Mr. DUNCAN. Thank you, Mr. Squier. And, Mr. Black.
TESTIMONY OF KEN BLACK, AIRPORT DIRECTOR, MANHATTAN REGIONAL AIRPORT
Mr. BLACK. Mr. Chairman, Committee Members, I appreciate the opportunity to represent the City of Manhattan today and I appreciate the invitation of Congressman Moran to be here.
Page 59 PREV PAGE TOP OF DOC Segment 2 Of 3
I am the airport director for Manhattan Airport. I also currently serve as the President of the Kansas Association of Airports and I sit on the board of directors for economic life lines, which is the largest group promoting a new comprehensive transportation program for the State of Kansas. Within my testimony I tried to frame for you our situation in Manhattan.
We are a primary non-hub commercial service airport in the National airport system. Therefore, we receive an entitlement in the form of airport improvement grants from the FAA. We hold a limited 139 Airport Certificate.
Now, our airport supports Fort Riley, a major military installation; a major educational institution in the form of Kansas State University; as Congressman Pease knows, an avid proponent in the most recent bowl series. And we hold the second highest level of claimants in the State of Kansas, second behind Wichita Mid-Continent.
We have non-hub subsidized air service through one carrier at present and that is U.S. Airways Express and we do have a facility charge in effect. And I, after going through that process, I thought about seeking professional help myself because it was quite arduous.
Our airport serves over 200,000 people in our primary service area. Our community is an advocate for safe aviation and safety in aviation and we fund our own traffic control tower. And in the process of completing an application for a Federal contract tower, we have also taken the initiative to build a contract tower terminal and open our general aviation facility this spring. So we are not standing still, waiting for AIP funding to catch up with us. We have a job to do and the community is supporting us.
Our challenges, like most airports, we have a low availability of resources and unlike larger airports with heavy traffic and PFCs that generate often adequate revenue for them, it is difficult for us to draw upon a number of resources. We also have limited revenue because our support base is in the services that we provide are with the citizens we are somewhat limited. But we do our job with what we have and every airport manager in the business has one primary admission and that is to operate a safe efficient airport. And we do that 365 days, 24 hours a day, seven days a week. And we do that with a very small staff in Manhattan.
Page 60 PREV PAGE TOP OF DOC Segment 2 Of 3
The resources required to operate a fully certified 139 airport requires extensive funding. On behalf of the community, and as we attract additional air service in the coming year we'll have to come to grips with that full-time rescue and fire fighting and requirements necessary in 107. However, we must raise our fees and raise our charges to the consumer to adequately meet those needs and the public at large might accept that if it ensures improvements in their safety.
However, even though the Congressman probably will do little to help us with our immediate cost, our direct costs at airports like Manhattan, you can help the consumer reduce their costs of using their system. And you can do so by assisting smaller airports and airports around the country in obtaining more reliable air service. The consumer needs reliable airports like Manhattan.
The unregulated airline environment has drawn air service away from Manhattan, and it has encouraged non-competitive practices by airlines in smaller, smaller markets. The Federal Government has the ability to assist the smaller communities with viable air travel markets to attract additional air service, and it can address non-competitive practices in the airline industry.
Manhattan has taken steps to solicit additional air service. The practices to attract air service is arduous because the community must do all the leg work for the airline. The City of Manhattan has spent over $55,000 since 1997 to analyze the air travel market and develop air service options that are supportable for both the community and candidate airlines.
Once the necessary information is developed, you must go out and sell your airport and your service to the airlines who you think are reasonable candidates capable of providing the service and realizing a profit in your community. In some cases incentives are necessary to share the risks with the airline, and that adds more costs into the equation. The benefits of good, reliable service would, hopefully, make this bearable to the community.
Page 61 PREV PAGE TOP OF DOC Segment 2 Of 3
Attracting quality air service to Manhattan shouldn't be this difficult. It is hard for us, or any other small community. And the Federal Government can change the airline environment to make things simpler. And I don't pretend to have a solution here today, but you could make things simpler perhaps, by providing incentive in our direction and bringing airlines back to communities of Manhattan. I do have a list of other items that I would like to share in closing.
We believe in Manhattan our City Commission will tell our delegation when they visit Washington in early March, Congress should support annual funding to the tune of the $2 billion level annually and this program should extend over several years so we could face our construction in our projects properly.
I would suggest to you that you increase the entitlement for primary, non-hub, commercial airports from 500,000 to $1 million a year. You can build 1,000 feet of new runway for about $1 million or you can build a new apron, but that is all you can do. You can't provide the lighting or all the other supporting structure necessary.
Take the aviation trust fund off budget and allow for its intended use.
We would suggest you continue the Federal excise tax indefinitely to support the trust fund.
And, as Bailis Bell has recommended, we would suggest that you raise the passenger facility charge to a maximum $5 per ticketed passenger from the $3 level now.
We would suggest that you support the establishment of the FAA as an independent agency with direct control over aviation trust fund expenditures.
Streamline FAA procurement and administration. And please encourage them to take a more customer service approach at airports, so we don't bang our heads quite as hard.
And support the Federal air traffic control tower program.
Thank you again for this opportunity. And I am here for any questions.
Page 62 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. DUNCAN. Thank you very much. And I just made a note about your suggestion to increase the 500,000 to 1 million. I think that makes a lot of sense. I will tell you that a lot of people say that the biggest thing in my district in Tennessee is football. And I thought that Kansas State got a really raw deal out of the BCS formula. I am going to yield my time for questions to Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you. First of all, let me express my appreciation to the panel for being here. And, Mayor and Dr. Witsman, please know that the issue of commercial service and its affordability at Mid-Continent is not just a Wichita issue, it is an issue for our entire State and the many of the contingent that I represent, they wished they had greater affordable opportunities here. And we look forward to working with our Congressmen and you to see if there are solutions. I have just, for my own information, how many markets can you fly out of Mid-Continent that have competition, more than one carrier?
Mr. WITSMAN. Dallas, we think, is the only one.
Mr. MORAN. Every other destination you were going to fly from Wichita you would have one choice of who your carrier is?
Mr. WITSMAN. Yes.
Mr. MORAN. And then, do you have an opinion as to what the impact of, ultimately, as we work our way through the court process on the Wright Amendment, what degree that will, if the legislation that Congressman Tiahrt pushed hard to see passed almost two years ago now, ultimately determined to be can be legally enforced? What impact do you see that having upon service at Mid-Continent Airport, what percentage of the problem does that solve?
Mr. KNIGHT. Our Airport Authority Congressman concluded that when Vanguard was flying out of Wichita, which is a low-cost carrier, it was saving passengers $1 million a month. Now, that is a Draconian figure for this market. So you can appreciate what has occurred since they were more or less driven out of this market. So the numbers are very big for us.
Page 63 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. MORAN. And do you still attribute a lot of the problem in Wichita to the Wright Amendment issue?
Mr. KNIGHT. I think the people that know a lot more about it than I do believe that that is an essential feature that has to be addressed.
Mr. MORAN. Mr. Chairman, again, thank you for being here today and this panel. I also want to point out the number of other airports from across my district, Hutchinson, Dodge City, Garden City are present. And we think in Kansas we all have a stake in both of the issues that were discussed here in front of our Committee here today.
Mr. DUNCAN. Thank you very much, Mr. Moran and, Mr. Boswell.
Mr. BOSWELL. I will yield my time to Mr. Tiahrt. I really appreciate you all being here today. I am not surprised. We have the same problem in Iowa in our capitol city and it's a serious matter. And if there was something moving last year, you know, I am sure you know—that we are trying to help alleviate that, but we hit a brick wall. I hope we can remove that, but I will yield the rest of my time to my hosts.
Mr. DUNCAN. You had Vanguard?
Mr. BOSWELL. We had Vanguard. They saved us a lot of money but they got stepped on and had to go. And the next day the prices went back up, they went even higher.
Mr. DUNCAN. I don't know if you even remember, but what were the prices, some of the prices?
Mr. BOSWELL. Well, right now, even today, of course, Access air, which you may have heard about, is a new start so we are kind of waiting to see what happens. But before they started last week we had a number of people, I am not sure what your folks would do, drive to Omaha, further to Chicago or New York and travel for about 30 bucks. But the business community that has to have a chance to plan two weeks in advance and all of this business, it has been a terrible expense to the community.
Page 64 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. DUNCAN. Mr. Tiahrt.
Mr. TIAHRT. Thank you, Mr. Chairman and Mr. Boswell, for giving me some time. I want to talk about the Wright Amendment. The Wright Amendment was passed to help Dallas/Fort Worth Airport to grow and prosper. There was some conflict between Dallas and Fort Worth about how they were going to do that. Former Speaker Wright, wrote this bill and it essentially set up a monopoly.
Now DFW has grown. In terms of air traffic they are the second largest in the world because of the cargo traffic. They have seven runways. They are working on their eighth runway and 82 percent of the traffic running in and out of the DFW is controlled by one airline which is the only airline that goes between Wichita and Dallas.
They have the monopoly and the strength to back up that monopoly and when there is competition they merely lower their air fares and run them out of town, then they jack them back up. They are probably the most expensive routes in the United States. It's a real problem for this community. If you look at the cost just nationwide, we heard that it's about a $1 million a month.
According to the Department of Transportation it's a cost of a quarter of a billion dollars, $250 million per year to the travelling public. It's no wonder that the airlines involved are trying to tie this up in the courts, this is their profit. I believe in the free market and believe they should have the ability to make a good, strong profit, but we need a level playing field in order to compete when we are trying to grow our air service, which is what our purpose was in the Wright Amendment.
So I think it's very important that the Committee know when we go back to Washington, how this unfairness continues, that we have support in Congress to overturn this unnecessary legislation that now gives unneeded advantages to the second largest airport in terms of air travel, one of the largest air carriers in the world. And this community as well as others are directly hampered.
Page 65 PREV PAGE TOP OF DOC Segment 2 Of 3
So I think Mr. Witsman and Mayor Knight did a good job in bringing this to our attention. But if we were able to repeal the Wright Amendment, do you think the benefits would expand to Wichita? Do you think it would? Mayor Knight might have some comments. Would it go beyond Wichita, would it include Salina, Hays, Garden City, some of those other areas?
Mr. WITSMAN. That is difficult to answer. If everybody is counting on Southwest I think that is a tougher thing in the ability out of Dallas and Love Field to have some other carriers we might have a better opportunity for that. I just want—everybody doesn't believe that the elimination of the Wright Amendment, despite all the damage it's done, would solve all of our problems because our worst routes now, if you want me to name names, price wise, are really Denver, Chicago, at this point.
And so a part of the reason is when you only have a single carrier there, and we had discount carrier try those routes, that is part of what has to happen, is what I am saying. Whether that is through regulation or possibly legislation is to prevent a predatory pricing killing off the competitor. And that is why some good analysis would be a fundamental good legislation.
Mr. TIAHRT. I want to thank you, Mr. Chairman, and Mr. Boswell yielding time to me. Thank you.
Mr. DUNCAN. Thank you, Mr. Tiahrt. And you mentioned about expanding the benefits. I know there is, Former FAA Administrator Alan McArtor, has been trying for several years to start a new airline. And he wants to serve Love Field to Memphis to national and many cities all around this region, if his plans would work. Mr. Pease.
Mr. PEASE. Thank you, Mr. Chairman. Mr. Witsman, you don't know what a journey it's been for me to be able to say, and really mean it, that Purdue University is a world-class university. I am a graduate of Indiana University which makes me especially glad to have Bob Knight with us this morning.
Page 66 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. WITSMAN. This one does not throw chairs.
Mr. PEASE. Let me ask, I don't know, Mr. Black, if you are the right person or some folks from the earlier panel are the ones to ask, whether there are differences in the allowable use for AIP funds versus PIC funds.
Mr. BLACK. Yes, there are differences. PFC funds looks at flexible use of land sites and operations and development, particularly in terms of terminal development gates access.
Mr. PEASE. Where AIP would not allow for gate expansion or parking facilities?
Mr. BLACK. It would be a difficult process. I have gone the AIP route with the production avenue. I wouldn't recommend it to anyone. It is a very difficult process. PFC is probably an easier route to go.
Mr. PEASE. There are those who would argue that airlines oppose PFCs which allows for greater capacity that allows for more competition. Do you have a comment on that?
Mr. BLACK. I went the PFC route strictly to gain another source of revenue and I will take any revenue source I can get that is worth my time. As for the competitive issue, I don't have the experience in that so I can't comment on that.
Mr. PEASE. Thank you. I appreciate your response. Let me ask, and again it may be someone from a prior panel; the FAA is currently working on new competition guidelines kind of like the points Mr. Witsman raised. Any reaction from Members of this panel or the prior one on this?
Mr. WITSMAN. I will say something and then maybe Bailis might want to. I want to be cautious about those guidelines because they talk about a new carrier that went up against a major. And the major could only restrict the number of seats that it could reduce the fare on. I am not sure that that necessarily ends up good for the consumer, particularly if there is other competition on that route that would still exist when it's gone. And I draw a distinction, a major may react the same way in two different routes but if there is still competition afterwards that may be all right. That may just be the way it has to be. But where they totally drive out the competition, that is an entirely different game.
Page 67 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. PEASE. Mr. Bell?
Mr. BELL. Thank you very much. Predatory practice business is sort of like pornography in that you can't define it but you know what it is when you see it. And it is very, very difficult, very, very difficult for the regulators to determine when predatory practices are because it's difficult to determine what the cost, the actual cost of that airline service is to the consumer and the actual cost of flying the airplane is because they can spread the cost from here to Tokyo, if they want to.
I might tell you that it is my objections to Patrick Murphy that got part of that process started. And I did that in Chattanooga, Tennessee, if I remember, and it, as I say, it's very, very difficult. We had one situation here where an airline pulled audits, large jet aircraft, saying that it could not afford to fly those to Wichita, Kansas. Then along came somebody with big jet aircraft and flew that and all of a sudden back come the big jets from the previous airline. And then the second carrier decided that they didn't want to commit suicide and they pulled out of the marketplace.
That by itself, with their own public announcement, says that they were flying at less than cost in the interest of running out a competitor. I have not delved into the real cost structure of all of those situations but those are their own public announcements they say.
Mr. PEASE. I appreciate all of those responses. I know we are short on time. Let me say thanks, in general, to this panel and the prior panel. It's nice to come to a place you can get yes-or-no responses or at least answers that you can understand. I appreciate that, of course. Thank you, Mr. Chairman.
Mr. DUNCAN. I suppose Mr. Boswell has a question he wants to ask in that regard.
Mr. BOSWELL. Thank you, Mr. Chairman. This is follow-up from Mr. Pease. Would you mind taking the time, this group right here, either panel or together, Mr. Witsman, Mr. Bell, to give us some suggestions from your perspective and as objectively as you could, what we might do to improve?
Page 68 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. WITSMAN. I will defer, first, to Mr. Bell.
Mr. BELL. I think if we had that answer we wouldn't be here probably. Mr. Boswell, thank you for asking the question. We don't know anything except to use the word jaw boning at this point and our Mayor, through his leadership, has put together a group of folks that are trying to come up with some ideas. But one of the approaches is to just address the airlines head on and say, first of all, we don't mind you making a profit from our community but we don't want you to make all of your profit from our community.
And, secondly, we love Tampa, Florida, but we don't want to subsidize Tampa, Florida and we think we are doing that and we don't think it's fair to the consumers and Wichita, Kansas.
Mr. BOSWELL. Along that line, if I could ask a little bit. Wichita Mayor here, you know there are other pockets of pain, and I am sure that information is available to you, but if you wanted to coordinate with the Mayor of DesMoines, Mayor of Knoxville, whatever else, you also could become more full force in this situation, if you go against the big seven you are a powerful force. Just a thought.
Mr. BELL. Thank you very much.
Mr. WITSMAN. The distinction that I would draw is I don't think that new entrants should be protected just because they are a new entrant. If there is a competitive situation on routes I am not sure why the Federal Government's power should come down on the side of that company. But if the Federal Government is going to ask us where we have noncompetition, a power of small number of companies controlling routes, and that is where I would try to drive it, and I think that is good data that could be used to back that up.
Mr. DUNCAN. Thank you very much, Congressman Hutchinson.
Mr. HUTCHINSON. Thank you, Mr. Chairman. I want to go along the same line. Mr. Witsman, thank you for the philosophical purity with which you addressed this difficult question of predatory pricing. I was reading some of the articles that were submitted to the Committee out of the Wichita Eagle, I guess it is, on the predatory pricing issue, and Secretary Rodney Slater talked about barring predatory pricing by American Airlines. It is already illegal under antitrust law in this country, so I don't think it's a matter of making anything illegal or changing the law in that regard, because it already is.
Page 69 PREV PAGE TOP OF DOC Segment 2 Of 3
And that leads to one question, to which I think I know the answer, because you already have a civil remedy. If the airline that was driven out believes that the competition the major airline was engaged in was predatory they could have filed a civil lawsuit in order to explore and get the information as to whether predatory pricing existed. They have a remedy to stop it. I assume the cost involved in private litigation is great, but you would also have a potential for a class action lawsuit, or citizens, I believe, would have standing, as Mr. Boswell was pointing out. Perhaps the Cities could get together and pursue that in a collective manner.
Just respond to that, if you would.
Mr. BELL. Thank you. I think the entire country recognizes exactly what you just said. And the only difficulty is the little airline is gone while that two- or three-year process goes forth. And our suggestion is that you establish some game rules that you place prior to—up front so everybody knows what the game is before you ever start. And then, of course, we get back to this definition of what is the cost of flying an airline. And that is where the real difficulty comes.
Mr. HUTCHINSON. So now the proposed guideline, and I am showing my ignorance here a little bit, did it address how you accurately compute costs and whether it's predatory pricing? I don't believe it does.
Mr. BELL. They are looking for experts to try to come up with that.
Mr. HUTCHINSON. For me, that would be the only logical way for the Government to take action, and the other way would be, as you pointed out. Civil remedy is a little bit difficult, but the Department of Justice has that authority as well. If the administration wants to do something, that is an avenue they could pursue through the Department of Justice. And if we don't have a definition of what costs are appropriate and how you define those costs, then you would need a test case to determine that. We'll have to start at some point. Unless there is a response, I will yield back my time. But that is something worth thinking about.
Page 70 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. DUNCAN. Thank you very much, Member Hutchinson. Member Thune.
Mr. THUNE. Thank you, Mr. Chairman. Just—and I don't suppose this is probably particularly helpful to Wichita because you already have good jet service, but the Manhattans of the world and others, there has been a lot of focus lately on this whole regional jet concept. And I am wondering if, in your estimation, if that is something that would help provide service and help serve airports.
Mr. BLACK. Yes, Congressman, I believe it would. The City of Manhattan has visited the carrier on three occasions now about regional jet service. These jets have seat sizes from 37 to 100 and in a small air-troubled market like Manhattan that 37-seat RJ is an excellent choice and it gets that consumer to that hub airport where they have many more choices and opportunities for travel. So that has been our focus. In the meantime, until that airline hits the tarmac, so to speak, in production we are going after the turbo perhaps, as they become available. But the RJ, I think, does have a role in the small market.
Mr. THUNE. Is that an issue at all in Wichita?
Mr. BELL. I would like to say, Mr. Thune, that Wichita now has 12 regional jets a day flying to and from hubs. The regional jets are a wonderful full service. They can get above the weather, they can go fast, they fit smaller markets, if you please, but it certainly is not an inexpensive route to go. And I think they are the most expensive seats on airliners that exist today. If they expect hundred dollar fares on regional jets, they may get to go about five miles or so.
Mr. THUNE. That wouldn't get you very far in Kansas. But my impression has been all along when we started discussing this notion of regional jets, that it would drive down an overhead and make it more affordable. But our experiences with the ones introduced in the Sioux Falls market is not the case and it's a very expensive way to travel. In terms of, you know, you have a terrible problem here with your pricing structure, I believe. And again, the competition issue, I am sure, is the one that everybody is focusing on here. Have you had any success with working with individual airlines to come up with sort of a business class fair, a reduced fair, which is something that has been done in our state? And as soon as one airline did it, boom, the other airline matched it. And I don't know, again, it's something that came about more from political pressure as anything else. But, I don't know, it's something that the region utilized. We were talking about it earlier. It was in our state and Senator Lott in Mississippi went to the airlines and said we need a business fare and it was kind of a cut-rate fare to accommodate business travel. Has that been tried at all?
Page 71 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. BELL. We have, for a number of years, tried to impress upon the airlines that they would carry a lot more passengers and make a lot more money with lower fares, but they haven't found in our favor there. We would be interested in reviewing the case study in your state to see, is it really working, though, at this point? Did it lower—you ask the questions, I am sorry, is the way it works here.
Mr. THUNE. That is all right. It's intended as a dialogue. You know, I think the—because you are talking about a walkup round trip fare and I think this fare is designed, obviously, if you are making it two weeks in advance, you get the benefit of discount rate. But most people who travel for business reasons don't have that luxury to say on impulse, to go down and get that same fare that is available to somebody who might make their plans in advance. And this was an attempt to address that issue. And I guess I don't have a lot of—it's been in effect now for awhile and it does keep the cost down and Northwest Star and United matched it. And I think it is going to try at other places in the country. I am suggesting it doesn't appear the airlines are operating in a totally free market. I think there is some political pressure brought to bear on that.
Mr. WITSMAN. Just a comment. While we haven't done that officially, a lot of companies have negotiated rates and we have negotiated a couple of times, that would be rates available to any business in Kansas that wanted to use that but not as extensively as you have. If I might, let's think about what Congressman Hutchinson said very logical about the legal remedies. And I think it's true that the dilemma is that the world is moving so fast and business so rapid that the legal system and the speed in which it moves, particularly when you have a large company with deep pockets, is much slower. So if that is an avenue to regress this problem then we may need something changed to allow the process to be more rapid. Otherwise, I think it's an unfair game and the large guy is able to win the game simply by stringing you out.
Page 72 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. THUNE. I think my time expired. Thank you.
Mr. DUNCAN. Thank you. The subcommittee is scheduled to go take the tour of the Cessna facility. Let me just say that, Mayor Knight, my father was City Law Director for three and a half years and Mayor of Knoxville six years after that. And I grew up at City Hall. And I think the toughest job in the world is to be a Mayor of a sizable city and I have heard that you are doing a great job out here. And we certainly appreciate, we know the demands on your schedule and we appreciate you taking time to be with us today.
And, in fact, all of the witnesses, and I know Mr. Tiahrt showed me, two years ago when I was here he took me on the tour of the tunnel that you have here and we are looking forward to seeing it. And there was a tour of the Raytheon facility this morning and now we'll see the Cessna facility. But this has been a very informative and very helpful hearing and we'll take these messages back to Washington and we'll try our best to help alleviate these problems as best as we can.
So with that, we'll conclude this hearing.
[Whereupon, the subcommittee was adjourned.]
[Insert here]
Next Hearing Segment(3)