Before I go any further I have to say a resounding thank you to
Tom [Donohue] and the Chamber for their help in some tough debates
of late that, if they’d gone the wrong way, would’ve
cost the aviation system a lot of money and set back our ability to
operate efficiently and modernize air traffic control.
We’ve counted on Tom and the Chamber before, and
they’ve always come through. I can tell you, you want them
standing with you in a firefight.
It’s a great pleasure to be back. This makes — what?
— three years in a row now I've been here? Well, let me tell
you. Speaking to the Chamber is one of those things you always look
forward to. You know business and aviation inside and out, and
that's an audience I want any day.
Yes, we look at the landscape of our industry today and think,
"Yeah … the summit theme is right on target … 'Ready
If it's anyone who deserves credit for where we are today, it's
all of you. Sometimes when I think of how much you do and how few
kudos you get for it, I find myself reminded of a story about
Orville and Wilbur and this whole notion of getting
They had tried repeatedly, as we all know, to get their flying
contraption off the ground. They had one disappointment after
another. And then finally, on that December day, there on and above
the sands of Kitty Hawk, Orville did what no man had ever done
So the Wrights wire their sister, Katherine. Quote: "We have
actually flown 120 feet. We'll be home for Christmas.”
Katherine ran all the way to the local newspaper and handed the
wire to the city editor. He looked at it and said, "Well, isn't it
nice? They're going to be home for Christmas."
The return of profitability in this industry has arrived with
similar understatement. Look where we are today. The wobbly legs
for the last couple of years are now regaining their footing.
One of Wall Street's most influential firms says: "We think 2007
could be an even better year than 2006 for most airlines. Industry
fundamentals have not been this good in years." Yesterday, the Dow
Jones Transportation Index closed sharply higher, based on the
strength of the airline industry. US Airways is one of the carriers
helping to drive the resurgence.
Now on the GA side, another great story. The latest industry
figures show that shipments of every type — pistons,
turboprops, bizjets — increased by double digits [13
percent, according to GAMA -- Ed.] in '06 from the year
before. And total billings? They finished the year at $19 billion
— an all-time high.
Yeah, things were on the brink there for awhile after 9/11. But
today? Aviation's on a surge.
So the question, at least from where I stand, is does all this
success mean we no longer need to change the way we jointly finance
the aviation system or the FAA? The answer? Absolutely not.
Because unlike your companies, which tie their costs to
revenues, we continue to operate under an antiquated tax system
whose time has come and gone. Our current revenue system would have
Rube Goldberg scratching his head.
The cost-based system we envision in our funding reform bill
gives the FAA the two things we desperately need to keep pace with
aviation — reliability and flexibility.
With them, we'll have a revenue stream that, for the first time,
is steady and predictable, instead of one that's all over the map.
In turn, we'd get the flexibility we need to fund capital projects,
with the certainty that the money's going to be there for us to
spend as the smart investments — that we all agree on —
require. That's not the case now.
Taxes are locked in the law for a decade, and we raise what we
raise. So even if the money's there over the long run, we're still
subject to the year-to-year volatility that makes it hard to do
We don't believe there'll be enough revenue coming in early
enough, and at the right points, to fund the NextGen and avoid
gridlock. Under the current system, revenues that come in can
always be held to offset the federal deficit.
The FAA's business model — plain and simple — is
Let me ask you something. How many of you out there are from the
GA community? Raise your hands. Good.
How many of you remember what it was like back in the 90s, when
you needed legislation to revitalize your industry?
For a few of the rest of
you who may not remember, here's a press release dated August 4,
1994. The headline is NBAA President Jack Olcott Calls
Enactment of General Aviation Revitalization Act of 1994 'A
Catalyst for a New Era in General Aviation.'
Olcott (right) goes on to call the new law quote "fair and
balanced reform." Now fast forward to 2007. Same situation, but
this time it's the FAA's revenue mechanism that needs revitalizing.
We, too, need fair and balanced reform.
With the FAA having revenue drivers that are similar to our cost
drivers, they more naturally move together. And, under a cost-based
system, revenues can be adjusted and recalibrated as and when we
Like any capital-intensive business, you have to do long-term
planning and spend money over a period of years. If the money's not
there, and you don't even have the ability to borrow it — or
take steps to increase revenues — then you're at a major
Can you imagine Bill Gates, Warren Buffett or any other CEO
who'd willingly allow his company to be in that position? Yet
that's where we are.
So let me put on my CEO cap for minute and walk all of you
through an example of two flights that drive similar costs for the
FAA, yet past vastly different amounts into the Trust Fund.
This lack of a connection between revenues and costs will help
you see what I mean when I say that our business model is broken
and it's time for a new way of doing business.
It's spring break across the country. You're going to take your
family on a trip to Miami — just as soon as you stop into
Washington for the aviation summit, of course.
Let's look at how much your commercial flight from LaGuardia to
Miami is going to put into our Trust Fund coffers.
Factor in the ticket tax, segment tax, and the fuel tax, and
we've got $2,015 coming in. Under our proposal, that same flight
would pay 36 percent less in user fees and fuel taxes than under
the current system. And that's because commercial users are already
They currently pay 97 percent of the Trust Fund revenues while
they drive 73 percent of the costs. GA, on the other hand, drives
16 percent of our costs, but contributes just 3 percent of
Our reform bill addresses this inequity and spreads costs more
fairly to all users of the system.
Let's look at another example. You're an executive headed off to
a corporate board meeting. The company's Gulfstream Four is headed
to Tampa from Teterboro, about the same distance as that
LaGuardia-Miami flight I mentioned a second ago.
The Gulfstream trip would put $236 in fuel taxes in the Trust
Fund, about one-tenth of the commercial flight's contribution. This
disparity will have an even greater impact as we move forward,
because we expect GA jets will be the fastest-growing segment of
Getting back to that Gulfstream, it would now pay $837 under our
legislation, mostly through fuel taxes. Continuing to pay through
fuel taxes — this is something the GA community
Now if a $500 rise in fuel taxes seems like a lot, contrast that
with a few of the other costs of owning and operating a G-4. For
starters, there's the 500 gallons of fuel burn an hour. If you're
shelling out $5 a gallon, that's twenty five hundred right
Throw in parts, labor, maintenance, landing fees, parking fees,
and you're looking at at least three grand an hour. Maybe more.
Now, if that G-4 I cited a minute ago lands at a non-hub airport
— say St. Petersburg Clearwater — it would only pay
fuel taxes. Not a dime in user fees.
Suppose you don't have a G-4 sitting around at your disposal.
Let's say you like to tool around in a Bonanza 36. You're leaving
Palwaukee Municipal in Chicago, headed to Kansas City Downtown
Airport. Again, not a dime in user fees. Not one penny.
All in all, we're not even asking GA to pay their full share.
Though they impose 16 percent of our costs — I alluded to
this figure a minute ago — we're asking them to pay 11
percent, with the rest coming from the general fund.
So, with all that you've heard so far, now do you see why our
financing mechanism won't bring us to NextGen fast enough?
To my knowledge — and you can check me on this — but
to my knowledge, there's no other federal agency in the entire
government that provides direct services to the public the way we
do, but depends on a value-based tax — one that's unrelated
to the costs of services that we provide.
Now there are other agencies
that are funded by excise taxes. Take Federal Highways, for
example. They're basically a grant program. They're not a service
provider like we are. And the service that we provide —
getting flights safely on their way — is quickly becoming
constrained by gridlock.
As we speak, delays are mounting due to gridlocked airports and
airspace. 2006 stands as the worst on record, with more than
490,000 flights that were late. This year isn't looking any
Through the first two months of '07, there've been 63,000
delays. We're going to have March's figures in a couple of weeks,
and I can tell you, the news isn't good.
Looking well down the road, we predict delays will increase 62
percent by 2014 without NextGen. There's simply no way we can
overcome congestion of this magnitude without transforming air
As you heard Charlie Leader earlier today, we must replace our
outdated air traffic control architecture with a 21st Century
satellite-based navigation system.
It'll safely handle dramatic increases in the number and type of
aircraft using our skies, without being overwhelmed by congestion.
We've begun putting some of the system's building blocks in place.
But making the move to NextGen is going to require large,
Our current budget right now puts costs at $4.6 billion over the
next 5 years, and a total of $15 to $22 billion through 2025. If
you think that that's a lot, think of the costs of congestion.
Estimates are that by 2022, delays will cost our nation $22
billion each year in lost economic activity. That's a hit to each
and every one of us. Think of what it'll be like when you can't
make that business meeting because the system has come to a
Aviation has come too far for us to let it slip away. The
question is — how do we sustain this momentum? How do we keep
this good thing going?
Well, accepting important challenges is the Chamber's
stock-in-trade, and so I have one for you today.
I want to conclude this afternoon by asking for your support for
financing reform for aviation and the FAA. Let's keep aviation
moving forward. I believe it'll make businesses more competitive
and dynamic. And, it'll help us deal with some of the capacity
challenges that threaten the vitality of our economy.
The aviation community knows more so than others how high the
stakes are. If Congress doesn't act on our proposal by September
when our taxes expire, we're all going to feel the pinch. And it's
a pinch that's going to last for ten years. Thank you.