House Bill Passage Supports PPP, Which Includes Private-Sector
Capital And Innovative Equipage Financing Programs
The FAA Reauthorization and Reform Act of 2011 passed by the
U.S. House of Representatives on April 1, 2011 includes a critical
amendment authorizing a public-private partnership (PPP) approach
to accelerating NextGen equipage for general aviation and
commercial airlines.
As a PPP, the NextGen Equipage Fund, LLC will bring substantial
private-sector capital to overcome the investment barriers that
have prevented many air carriers and other operators from investing
in the NextGen technologies for their aircraft. These barriers are
driven mainly by the need to start making these investments several
years before the FAA systems can deliver the benefits.
"Accelerating NextGen aircraft equipage will unlock real
economic growth and benefits, such as job creation, as soon as
equipment orders are placed." said Russ Chew, general partner of
NextGen Fund LLC and former FAA chief operating officer and JetBlue
Airways' president. "According to research that we have conducted,
accelerating NextGen equipage will create up to 32,000 jobs and
$23.5 billion in economic growth over its five-year ramp-up
period."
The NextGen Fund is partnering with ITT Corporation, other
aerospace companies and Wall Street, to provide the more than $1.5
billion in financing for the industry to adopt the avionics
technology needed to help make NextGen a reality," said Michael
Dyment, general partner of the NextGen Fund LLC, and managing
partner at NEXA Capital Partners. "We are proud to bring a
private-sector solution to the aviation industry that currently has
few alternatives available to address equipage financing. NextGen
is the only system capable of reducing passenger delays, while at
the same time lowering fuel burn and producing favorable
environmental benefits."
The NextGen Equipage Fund will enable the retrofit of up to 75
percent of the U.S. commercial air transport fleet –
including airlines and some general aviation aircraft – with
NextGen technology such as ADS-B and data communications. The
NextGen Fund's innovative offering combines financing at
competitive rates backed by loan guarantees with proven credit
management practices that drive default risks to near-zero.
The main advantage to the airlines and commercial operators is
that they can equip for NextGen without a large cash outlay or
adding more debt. Payments for the equipage would be deferred until
specific NextGen services are delivered to the aircraft operators
by the FAA. Encouraging broad equipage among commercial air
transport is necessary to maximize the benefits delivered to all
users.
Said Jim May (pictured, above), former CEO of the Air Transport
Association, "Airlines are not in a position to shoulder all the
financial risks of buying and installing avionics based solely on
government promises that the capabilities needed to enable NextGen
will appear sometime in the future. This must become a
public-private partnership."
According to the FAA, once fully rolled out NextGen stands to
broadly benefit airlines, government and the U.S. economy at large,
with as much as $40 billion a year in fuel and other cost savings.
Airline passengers also stand to benefit from faster NextGen
implementation, including decreased passenger delays and shorter
flight times due to more direct air routes.
"One of the larger challenges facing our ability to realize the
enormous benefits that NextGen is poised to bring our nation, is
the issue of establishing a sound business case for equipping
airlines with NextGen compatible systems," said Marion C. Blakey
(pictured, above), president and CEO of the Aerospace Industries
Association and former FAA administrator, in public testimony.
"Aircraft equipage is just as much a part of our national airspace
system infrastructure as airports, runways and satellites. The
NextGen Equipage Fund is an innovative way to incentivize the
retrofitting of commercial aircraft with NextGen avionics
equipment. The time is now to encourage the involvement of private
sector investment capital."