Also: Voss Out As ICAO Nominee
The following is the unedited text of FAA Administrator Marion
Blakey's speech this morning before the agency's annual Forecast
Conference in Washington, DC. She begins with the breaking news
that the FAA's bid for Bill Voss to become
Secretary General of ICAO has been
rejected -- and proceeds to detail other
challenges faced by the FAA and the aerospace industry as a
Aero-News EIC Jim Campbell is on the scene in Washington,
and we'll be bringing you much more information on the outcome of
the conference shortly. For the moment, here is Blakey's take on
the upcoming challenges:
Good morning, and thank you, Sharon.
I have to start with an observation about some breaking news.
You know, with an industry that’s changing right before our
eyes, we’re facing new and different challenges every day.
Just yesterday, we got some news that was unfortunate. As some of
you know by now, the bid for Bill Voss to become Secretary General
of ICAO missed by the narrowest of margins. It was hard fought on
our front. But you know that comes with the territory.
Nevertheless, our pursuit of the advancement of aviation safety
remains firm and our support of ICAO is unwavering. And let there
be no doubt that other challenges – the ones we know about
and the others we don’t – are just around the corner.
Either way we’ll be ready.
For those of you
who’ve come into D.C. just to attend this conference, let me
extend a special welcome. Those of us who are here year round know
that this winter weather season hasn’t been quite what we
expected. As I said a moment ago, you’ll be hearing quite a
bit about the unexpected throughout this conference.
You know, just about a month ago, we had unseasonably warm
temperatures. High 60s, low 70s in January. Being from Alabama, I
can tell you that’s my kind of winter. But just a few days
later, boom, 14 inches of snow. If you remember, New York got 23.
We went from shirtsleeves to snow shovels in about 72 hours. Even
the Farmer’s Almanac was surprised.
With that as a backdrop, I heard a story that gave me a chuckle.
When the snow was at its heaviest, one of the locals from this area
was headed to Morgantown. He stopped at a shopping mall around here
to pick up a package. Now it’s dark, but he’s ready to
go. The snow’s coming down pretty hard; visibility is just
about zero. Lucky for this guy, he sees a snowplow and he does what
most of us, I guess, would do. He falls in line right behind it.
Why fight the snow when a machine can do it for you?
So he follows the snowplow for about 45 minutes through each and
every turn. He just follows the red tail lights right in front of
him. It’s a tough ride, but at least he has a clear path to
follow. Then the snowplow stops, and the driver gets out. The
snowplow driver walks back to the guy and says, “Where are
you going? You’ve been following me for almost an
hour.” The local says, “Morgantown.” The snowplow
driver says, “Well, you’ll never get there following
me. I’m plowing out this parking lot.”
I think that’s where we are with aviation. For years, many
folks have told us to follow along the obvious path that was
already there. Just do what you’ve always done. Well, along
comes 9/11, Internet pricing, SARS, the jump in the price of oil
and all of the sudden “follow the leader” doesn’t
work any more.
Even with all that and the price of oil at the top of the list
aviation is in a period of robust growth with a temporary pause
here in 2006. The growth is different than what we would have
predicted five years ago, but the growth is there.
The fact is our industry has changed. Our industry continues to
change. Low-cost carriers and regional carriers (the smaller jets)
are continuing to redefine the market. We expect that passenger
totals will continue to grow at more than 3 percent per year with
international growing another 2 percent beyond that. We’re
still on track for one billion passengers by 2015. Revenue
passenger miles for the regionals are up almost 7 percent. For the
low cost carriers, it’s almost 8.
Cargo is experiencing solid growth. Domestically, it’s up
3.2 percent. Internationally it’s almost double at 6.3
percent. I think it’s fair to say that with fuel prices so
high, the domestic cargo industry is seeing a shift to trucking for
It’s a certainty that our workload continues to grow. En
route traffic is up 3 percent, and we expect it to stay that way.
Over the next few years, we expect general aviation to make another
jump because of the very light jets that are in the offing.
The regionals are continuing to expand their share of the
domestic market, from 22 percent last year to 22.5 percent next
year to more than 25 percent by 2017. You know, RJs create the same
workload in the system but they bring in less revenue per operation
for the FAA. In fact, one of the most dramatic changes in this
year’s forecast is the decline of seats on domestic aircraft.
Over the next five years, we see it continuing to decline by an
average of 2.3 percent per plane across the entire fleet. In 1999,
the number of seats per plane averaged 130. We see it shrinking to
117.7 by 2011.
We also see that in light of the low-cost carriers and regional
jets growing the way they are, more and more passengers will bypass
the traditional hubs and fly directly to their ultimate
destination. And while the legacy carriers aren’t growing as
they have in the past and their share has gone from 70 percent in
2000 to 55 percent, they are changing as well. It’s not an
uncommon debate: Is this particular airline a legacy carrier or
low-cost? The labels aren’t quite as clear as they used to
The times, they really are a changing.
But as I said from the outset, following the leader is no longer
a safe game to play. For the FAA, as the plane size continues to
shrink and overall passenger numbers are on the rise, all of this
means more flights, which means more workload.
More planes, smaller
planes, cheaper tickets – they point to the increasing need
for the FAA to operate more like a business. As you know,
we’ve cut layers of management in our air traffic
organization. We’ve costed out our activities and we’ve
asked stakeholders to help us trim what’s no longer
important. Let’s face it, if it’s not important to you,
why should we do it?
The A-76 process with our automated flight service stations has
been a smooth transition. Better service, better technology, and
cheaper on the taxpayer’s checkbook.
Likewise, our efforts at the negotiating table are still a place
where we hope to provide a fair wage; a very fair deal for our
workers and a fair deal for the taxpayer. The last contract left
the taxpayer with the short straw and a hefty tab to pick up. What
was to cost $200 million ended up at $1.2 billion. That won’t
happen again. We cannot and will not sign a contract that we cannot
afford. Salary increases of 75 percent for our controllers are a
thing of the past.
We’re tightening our belts because we’ve got to
mirror the industry we serve. With the advent of busier skies on
the very near horizon, the need to modernize is all the more
important. The next generation air transportation system is not a
wish list. If we don’t modernize, the system will be a hard
drive that’s just too full. It will run slower and slower and
then it will stop. We need to modernize. If we don’t nail
that, nothing else we do will matter. If we want this forecast to
come true, we must have NGATS.
So, how do you pay for all this? That’s where the trust
fund comes in. In 2001, the FAA predicted revenue of $14.5 billion
in 2005, which would have covered the 2005 FAA budget. In fact, the
2005 revenue was $10.7 billion, a reduction of $3.8 billion, or 25
percent. At the end of 2005, we projected that the Aviation Trust
Fund balance will sink to $1.9 billion, a dangerously low
But the actual number is deceiving. The formula that gets us
there just doesn’t work anymore. The price of the ticket
drives the trust fund. The price of a ticket in no way reflects the
cost to provide that service. There is no connection between the
price of a commercial airline ticket and the FAA’s workload.
We may as well be tied to the price of a gallon of milk. While some
folks have focused on the fact that revenue is going up this is
only because of volume.
That formula worked for years. It doesn’t anymore. A
cost-based revenue system would align the revenue structure with
FAA costs and protect both the FAA and the customers we serve from
scenarios where revenues and costs diverge. A cost-based revenue
structure would be more equitable in terms of aligning user taxes
and fee payments with the costs they impose on the system.
With all that said we’ve turned to industry, to Wall
Street, to financial analysts for a better way to do it and our
proposal is at OMB right now. When the taxes that fuel that trust
fund expire next year, we’ve got to have the new way already
in place. If they expire without a new safety net, it will be too
late for all of us.
So this year’s forecast is a momentary bump in the road of
what has been real growth. The growth comes in a package
that’s new to us, but it’s growth nevertheless. So
we’re in a period of bumpy weather but that in and of itself
is not a bad thing. We’re showing the rest of the world how
to handle turbulence in the economy of this industry.
The snow plow shows us for sure that we’re not going to
solve the problems we face today and tomorrow with following the
obvious path of yesterday’s solutions. When you follow
blindly, you can be on the wrong road and not even know it.
Sometimes, you’re stuck in a parking lot and you don’t
even know it. We need a fresh approach. And that, I can assure you,
is what we intend to take. Thank you.
Now, it’s my pleasure to introduce the Secretary of
Transportation. Norman Mineta is an outstanding advocate for
aviation, a real driving force. Back in the 1990s, the National
Civil Aviation Review Commission was formed to take a look at
aviation. Most of us know it now as “The Mineta
Commission.” That group came up with a to-do list that
we’re still following today. Mr. Mineta brings wisdom and
insight to the table and we’re fortunate to have him here
with us today. Please welcome the Secretary of Transportation, the
Honorable Norman Y. Mineta...