STATEMENT OF

HANK KRAKOWSKI,
CHIEF OPERATING OFFICER,
AIR TRAFFIC ORGANIZATION,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

HOUSE OF REPRESENTATIVES
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION,

HEARING ON

AIR TRAFFIC CONTROL FACILITY STAFFING. 

JUNE 11, 2008.

Chairman Costello, Congressman Petri, Members of the Subcommittee:

Thank you for inviting me here to testify today on air traffic controller staffing issues.  The Federal Aviation Administration (FAA) is its workforce, and we consider these issues to be of the utmost importance to maintaining the safest aviation system in the world.  In my testimony today, I would like to give you both an historical, as well as current, overview of the national airspace system (NAS) and the staffing issues facing us today.  As part of that, I would also like to discuss some of our efforts to recruit, retain, and train controllers, and note some of our other safety initiatives to ensure that our air traffic system remains as safe as possible for the traveling public.

Historical Overview

Let me first begin by taking you back to 1981, when President Reagan fired over 10,000 members of the Professional Air Traffic Control Organization (PATCO) for an illegal strike.  In the wake of that event, our controller workforce was reduced to less than 4,700.  The FAA began a large-scale recruitment and selection process to rebuild the controller workforce.  By 1992, when our controller workforce was once again fully staffed, almost 28,000 people had entered the FAA Academy screening program.  Of that number, 16,000 individuals or 57 percent successfully completed the program, 33 percent did not pass, and 10 percent left the program for other reasons. 

Of the remaining 16,000 individuals, approximately 72 percent of those assigned to Air Route Traffic Control Centers (ARTCC) achieved the Certified Professional Controller (CPC) status, while 84 percent assigned to terminal facilities achieved CPC status.  Many of those not successful in the facility-training program were reassigned to less demanding facilities and ultimately achieved CPC status, while others secured jobs elsewhere within the FAA.  The remainder resigned or were dismissed from the agency.

Recruitment and Retention

Even though the controller workforce was once again fully staffed, the realities were that, because of the concentrated, post-strike period of hiring, the FAA would have to once again begin a major recruitment effort as these controllers began to age out of the system.  The vast numbers of controllers hired in the 1980s were long-predicted to retire once they reached retirement eligibility after 25 years of service. 

As you know, the FAA initially developed a 10-year controller workforce staffing plan in 2004.  We refine this plan each year.  Last year, for example, we developed staffing ranges for each facility.  The long-term focus of these ranges is on the CPC, who provides the maximum scheduling flexibility for a facility.  As we update and refine our ranges, we will continue to make adjustments based on facility traffic performance.  In the interim, many facilities will be in a state of transition as the agency manages through the ongoing retirements and concurrently certifies newly hired controllers.

However, the ranges also take into account the fact that developmental controllers, especially those in the later stages of training, can and do staff positions for which they are fully certified.[1]  This is not a new practice.  For example, Philadelphia International Airport is a Combination Radar Approach Control and Tower with Radar facility, in which controllers work in the tower cab portion and in the radar room (also known as a “TRACON ”).  In order to be a CPC in these types of facilities, the controllers must be “checked out” or qualified on all of the positions in both the tower and the TRACON .  Thus, a developmental controller who has completed 50 percent of the required training to achieve CPC status, is fully certified to work all positions in the tower independently, while continuing to qualify for the radar positions.

In 2007, the anticipated retirement wave began, and we project that retirements will continue to hit record numbers in 2008 and 2009.  While our historical hiring goal was a “one-for-one” model (one new hire for every one retirement), beginning in 2004, we increased our hiring requests to prepare for the anticipated retirements in the next decade.  Our strategic hiring plan took into account both projected retirements as well as expected attrition in new hires.  From 2008-2017, we plan to hire approximately 17,000 new air traffic controllers.

To achieve these ambitious goals, the FAA has been recruiting aggressively.  In addition to our more traditional vacancy announcements to recruit from the general public, retired military controllers, eligible veterans, and current and former civilian air traffic controllers, we have been using major Internet outlets such as Careerbuilder.com, Monster.com, and CraigsList, as well as the social/professional networking site, LinkedIn.  We have participated in military job fairs across the country, as well as advertised in USA Today and Aviation Week & Space Technology.

In an effort to recruit more women and minorities, we have also advertised in special interest newspapers and magazines, such as Native American Times, Asian Week, Latina, and Minority Careers.  The FAA has also participated in the NAACP Diversity Job Fair, the Congressional Black Caucus Diversity Job Fair, and the League of United Latin American Citizens Job Fair in FY 2007.  Additionally, our joint effort with the Department of Veterans Affairs enables veterans with disabilities to take advantage of on-the-job training opportunities through FAA’s new Veterans’ Employment Program. This initiative allows veterans with disabilities to train for air traffic control and airway transportation systems specialist positions.

In October 2007, the FAA chose an additional nine colleges and universities to be part of the Air Traffic Collegiate Training Initiative (AT-CTI) program, which brings the number of schools currently in the program to 23.  We plan to continue to offer the opportunity to other schools to apply to the program.  This partnership between the FAA and the colleges and universities in the AT-CTI program will contribute to meeting air traffic controller hiring goals in the coming years.  This is a hiring source of growing significance for the controller workforce.

One of our more effective recruitment tools is the offer of a recruitment bonus of up to $20,000 for terminal and en route new hires who have at least 52 consecutive weeks of experience within the last two years as a certified air traffic controller with control tower operator or radar certification.  New hires with no experience do not qualify for a bonus and are sent to the FAA Academy in Oklahoma City for one to three months (depending on the type of facility they will staff), where they are paid a base salary of $19,300 per year for the short time they are there.  Upon successful graduation from the Academy and assignment to a facility, their starting salaries almost double to at least $37,500 per year (including locality pay).  The average controller is making about $50,000 at the end of his/her first year.

New hires at the Academy receive additional benefits beyond their base salary.  Academy tuition is funded by the FAA, and the FAA pays for travel to and from the Academy based on the student’s official address.  While at the Academy, FAA provides transportation between central locations throughout the city and the Academy.  Controllers at the Academy are also entitled to room and board, which is reimbursed at $79.20 per day.  This covers meals, lodging and incidentals.  Thus, student controllers earn $2,376 in per diem every 30 days at the Academy.  Controllers at the Academy also begin earning annual and sick leave and are eligible for other federal benefits such as health and life insurance.  Those controllers who are hired under a Veterans Recruitment Appointment, or who are retired military, or current or former Federal controllers, receive a starting base salary of $33,100, and in addition receive locality pay, tuition, travel costs, room, board, and benefits.  As you might surmise, with such salaries, training opportunities, and benefit packages, we have found that we have had no problems attracting applicants.

The FAA has also streamlined and centralized the controller hiring process.  Individual facilities can identify vacancies and select prospective new controllers as much as one year in advance.  Our security and medical clearance process has been improved by implementing Pre-Employment Processing Centers (PEPCs) to reduce the time it takes to complete pre-hire screenings, such as medical examinations, psychological and drug testing, and security clearance applications.

These initiatives have yielded a deep applicant pool of quality candidates.  As noted above, we have discovered that with our salary and benefits packages, we have had no problems attracting qualified candidates.  Since March 2008, we have had over 5,500 qualified applications available for selection and placement from our various applicant sources (former FAA controllers, veteran military controllers, CTI students, and public sector announcements).  Our largest applicant source is our public sector announcements, which are published monthly.  The last two such announcements combined yielded 2,500 qualified candidates.

In addition to our aggressive recruiting efforts, the FAA has been offering retention incentives to retirement-eligible controllers on a case-by-case basis.  Retention bonuses are typically 25 percent of an individual’s salary with a cap of $25,000.  Controllers may also be eligible for relocation and reassignment bonuses for certain key facilities.  Thus far, 44 retention bonuses have been accepted, and another 26 are pending consideration. 

Training

We recognize that there is a great deal of interest over the high number of developmental controllers (controllers still in training) and the high ratio of developmentals to controllers in some of our facilities.  Let me first say that training is something on which the FAA places a very high priority.  Our controller workforce plan is projected to keep trainee to controller ratios below 35 percent.  Currently, the ratio is about 25 percent.  While we currently do have a higher percentage of developmentals in our facilities than we have had in recent years, our training programs are set up to maximize quality training, both in the classroom and on-the-job, while continuing to ensure we are keeping the air traffic control system as safe as possible.  In order to address this concern further, allow me to take you through the training process.

First, recruits begin training at the FAA Academy in Oklahoma City.  There, they learn the fundamentals of air traffic control for their particular job path:  en route, tower, or terminal radar.  The FAA Academy trains developmental controllers using classroom lectures, computer based-instruction, and simulation systems.  The Academy lays the foundation for developmental controllers by teaching fundamental air traffic control procedures that are used across the country.  When developmental controllers graduate from the Academy, they are prepared to adapt to their assigned facility and successfully complete the training required to reach CPC status.

Upon successful completion of their Academy training, developmental controllers then report to their assigned field facility to continue with their on-the-job training.  Facility training begins with developmental controllers learning facility-specific rules and procedures.  A developmental then will begin on-the-job training on an operational position.  This training is conducted by a CPC who observes and instructs a developmental controller as they work the control position.

During their on-the-job training, developmentals are assigned to different positions within their facility.  Once they have mastered those positions, they are then certified for those positions.  I want to emphasize that no developmental may control live traffic independently until he or she has been certified to work that traffic position.  Each control position has a minimum and maximum number of on-the-job training hours allotted.  Based upon the recommendation of the training team, a developmental can be certified by the supervisor on a control position anywhere between the minimum and maximum number of hours.  The final result at the end of training is achieving certification on all positions, or CPC for that facility.  If a developmental controller fails to certify, they can be removed from service, or reassigned to a less complex facility in accordance with agency procedures.  The on-the-job training process is designed to provide developmental controllers sufficient seasoning time and opportunity to develop their skills as they progress towards becoming CPCs.

The FAA has been leveraging the use of more advanced technologies to improve training while reducing the time needed to fully train our controllers.  Our latest data indicates that where it used to take three to five years to train an air traffic controller, controllers can now be trained in one to three years, depending on the complexity of the facility they staff.  The most recent data shows that average training time to achieve CPC status is 1.4 years for terminal controllers, and 2.6 years for en route controllers.  We have achieved this reduction, not by cutting training time or quality, but by improving the training and scheduling processes, and by the increased use of training technologies such as simulators. 

With simulators, training no longer depends on the density or complexity of actual air traffic operations.  Simulating the real-time traffic environment provides a uniform training format for trainees to develop the necessary skills and experience that would take much longer solely through on the job training.  Through the use of simulation systems students will benefit from consistent delivery of simulated traffic, weather, and unusual situations. 

The simulation system provides significant improvements to existing training operations.  It eliminates the need for preemptive intervention on the part of an instructor to avoid a possible hazardous situation, allowing the student to “work through” the scenario until they can consistently generate a successful outcome.  The simulator system does not interact with actual air traffic control operational systems and poses no threat to service.  It realistically replicates operations that enable training in an absolutely safe environment.  In addition to initial training, the simulator system provides for refresher training to heighten awareness of controllers by generating seldom seen operations and airport conditions.  Controllers who have recently been assigned to a new facility can also use the system to train in their new operational environment, reducing their training time.

We have also asked retired FAA air traffic controllers to return as contractors to train the new workforce.  More than 100 retired controllers became contract training instructors in FY 2007.  They joined an existing 200 contract instructors from previous years.  This allowed the FAA to retain their valuable expertise and train the next generation of controllers.  These experts focus solely on training the next generation of controllers, rather than moving back and forth between working traffic and on-the-job training.

The Office of the Inspector General has made recommendations to us about improving our training processes, including centralizing oversight of our training programs at headquarters.  To that end, we recently created and filled a new senior position in the Air Traffic Organization that is responsible for training, both controllers and technicians.  Our goal is to focus and enhance the high priority we place on training, and to centralize our training policies to ensure accountability and oversight.

Facilities Staffing

The FAA has learned many lessons over the years following the PATCO strike.  Among these lessons are that we recognize that we have a committed and dedicated controller workforce.  Immediately following the PATCO strike, more than half of our controllers were trainees.  Our controller workforce plan avoids such future disparities.  As mentioned above, the plan projects an average trainee to controller ratio below 35 percent, while the current average is about 25 percent.  And, while we have a higher percentage of developmentals (≥35 percent) in some of our facilities now, that will decline as trainees gain their certifications.  We aim to staff every facility according to its current and future needs.  Each facility is unique and each facility requires its own unique staffing solution. 

The FAA staffs facilities to the traffic volume and controller workload.  And, since traffic volume is dynamic, so are staffing needs at any given facility.  Our “staff to traffic” model exercises the flexibility to match the number of controllers at various facilities with traffic volume and workload.  Staffing to traffic requires the FAA to consider many facility-specific factors.  They include traffic volumes based on FAA forecasts and hours of operation, as well as individualized forecasts of controller retirements and other attrition losses.  Proper staffing levels also depend on the efficient scheduling of employees, so the FAA tracks a number of indicators as the agency reviews staffing levels.  Some of these indicators are overtime, time on position, leave usage, and the number of trainees.  In addition, staffing at each location can be affected by unique facility requirements such as temporary airport runway construction, seasonal activity and the number of controllers currently in training.  Staffing numbers will vary as the requirements of the location dictate.

The State of the System

I would like to turn now to an overview of what is happening in the NAS; the state of the system is the major determinant in our staffing needs.  Currently, we are seeing a downturn in air traffic in most of the country.  Due to the rising cost of fuel and other financial pressures, airlines are being forced to make changes.  Major carriers have announced substantial reductions in their flight schedules and five airlines have gone bankrupt.  These events have resulted in a reduction of over 42,000 operations from the air traffic control system.  General aviation operations are also down, due to fuel and insurance costs, further de-stressing the system.  With a few notable exceptions -- JFK, Denver and San Francisco, for example -- air traffic is down approximately 2% nationally year over year.     

In most cases, this downturn in traffic has translated into fewer operations that a given controller needs to oversee.  In 2000, the average annual number of operations per controller was 10,028.  For the 12 month period ending April 2008, the average number of operations per controller is 9,260.  “Time on position,” the time that a controller actually spends controlling traffic, is averaging 4:45 hours per eight hour shift.  And, average overtime for the past 12 months is 2.2 percent; in 2001, average overtime was 1.5 percent.  We do recognize that there are some facilities with greater staffing needs, and we are adjusting our planning to address these facilities. 

While the short-term pressure is easing, we still forecast long-term growth.  Thus, we increased our controller workforce by a net gain of 256 in FY 2007, and we are on target to increase it an additional 256, to an end of year target of 15,130 for FY 2008.  The President’s budget for FY 2009 calls for a further net increase of over 300 controllers.  Given the current airline reductions and current staffing statistics, we believe our staffing goals and plans are on target.

Other Initiatives

In addition to our recruitment, training, and retention efforts, as well as our management of staffing at our facilities, we are moving forward with other initiatives that we believe will improve safety and better engage our workforce.

The first of these is the Air Traffic Safety Action Program (ATSAP), a joint pilot program between the FAA and the National Air Traffic Controllers Association (NATCA), in which controllers can voluntarily self-report safety hazards and incidents to the agency for review and risk assessment, without fear of retribution.  ATSAP comes after several years of negotiation and is a logical extension of the FAA's aviation safety action program in which air carriers voluntarily participate.  The pilot program is scheduled to last 18 months, during which time either side may terminate the agreement. It will be implemented at several targeted facilities.  

Another major FAA initiative is scheduled for next week.  We will conduct our first Annual Symposium on Fatigue in Aviation from June 17-19, 2008.  The symposium will offer the United States and world aviation communities the opportunity to focus on fatigue, its management, and risks.  The agenda will offer content from 21 expert presenters from around the world and will be moderated by industry leaders, labor, and medical experts.

There will be three flight operations working groups that will be led by a panel of three management, union, science or government representatives, and facilitated by fatigue science experts.  These groups will consist of pilots and flight attendants and will break down into one “long-haul operations” group and two “domestic operations.”  The long haul group will consist of representatives from major and cargo airlines.  Both domestic groups (one with a transcontinental focus; the other with multi-leg/short haul focus) will represent pilots and flight attendants from major and regional airlines.  These three groups will also include a variety of participants including those from labor unions, the scientific community, the international aviation community, the National Transportation Safety Board, and other federal agencies.  We will also be having “shift work” groups which will all be jointly comprised of participants from air traffic control, maintenance, ramp operations, dispatch, and technical operations.  Each of these will be led by a panel of three industry or union decision makers.  Leadership structure and identity, as well as meeting processes for all, are in final development.

Our goal for these workgroups centers on the understanding that the fatigue issue demands a balanced, collaborative and earnest effort to reduce fatigue risk in aviation.  The symposium builds upon the potential for industry and government (both labor and management), and science to propose fatigue mitigation strategies that could develop into industry-wide policy, non-prescriptive approaches, regulatory initiatives, potential propagation of best practices, and other initiatives that may originate from the symposium workgroups.

Conclusion

I hope that my statement has helped illuminate the FAA’s plans and goals for our controller workforce.  As I said at the beginning, the FAA is its workforce, and we are proud to have one with dedicated individuals who are committed to our mission:  to ensure the safety and efficiency of our aviation system.

Chairman Costello, Congressman Petri, Members of the Subcommittee, this concludes my prepared remarks, and I look forward to answering any of your questions.

Statement of

Mr. David Kelly
Acting Administrator
National Highway Traffic Safety Administration

before the

Subcommittee on Surface Transportation and Merchant Marine
Infrastructure, Safety, and Security
Committee on Commerce, Science, and Transportation
United States Senate

Oversight Hearing on

Bus Safety

September 18, 2008

            Mr. Chairman, I am David Kelly, Acting Administrator for the National Highway Traffic Safety Administration.  I appreciate the opportunity to appear before the subcommittee to discuss the important issue of bus safety, and particularly motorcoach safety.    

            Every death and serious injury that occurs on our roads is a tragedy.  I share the same feelings of concern and empathy for the individuals and families who have been tragically affected by these crashes, especially when our most valuable resource, children, are involved.  I extend my deepest condolences to each of them.

            Over the past several years, NHTSA has been very focused in our efforts to improve motorcoach occupant protection.  In April 2002, NHTSA sponsored a joint public meeting with Transport Canada to hear the views and comments from motorcoach manufacturers, operators, users, and the public at large in order to be better informed of their specific needs, and to help us determine what improvements in motorcoach passenger crash protection standards were most warranted.  With input from that meeting, NHTSA and Transport Canada entered into a joint program in April 2003 that was completed in September 2006.

The joint program with Transport Canada focused on improving glazing and structural integrity on motorcoaches to prevent ejections through the use of modified window glazing materials and bonding techniques.  There were several reasons the program was focused in this way

1.     Both Transport Canada and NHTSA had observed ejections through windows in motorcoach crashes.
2.     Several NTSB safety recommendations have been concerned with glazing, window exits, structural integrity, roof strength, and survival space.
3.     Focusing the joint program on this area seemed the best way to address a broad array of the issues that had been raised by NTSB, and improve occupant protection for all crash conditions.

Completion of the joint study with Transport Canada coincided with completion of an internal NHTSA review of emergency egress and flammability requirements that are applicable to motorcoaches, as well as the NTSB hearing on the tragic motorcoach fire that occurred in Wilmer, TX during the evacuation for Hurricane Rita.  The testimony from the Wilmer NTSB hearing, in addition to the Transport Canada and internal agency reviews, caused NHTSA to re-examine our priorities for improving motorcoach safety.  After completing a comprehensive review, we developed NHTSA’s Approach to Motorcoach Safety, which was made public in August 2007.  Our objectives in developing the safety plan were to review motorcoach safety issues and develop approaches directed to the areas that have the greatest potential for achieving improved motorcoach safety most quickly.  NHTSA is making significant progress in our major research effort into passenger protection for motorcoaches in crashes.  Four strategies the agency is pursuing on a priority basis are seat belts, roof strength, emergency evacuation, and fire safety protection.

We have been conducting various crash and related tests to determine the best strategies for enhancing passenger safety, especially ways to prevent passenger ejections in crashes, such as through the use of seat belts.  In December 2007, the first motorcoach crash test ever conducted by the agency was completed.  The test was a full frontal barrier crash at 30 miles per hour with 22 crash test dummies aboard in a variety of seat designs, seating configurations, and restraint usage.  Using the crash information from this test, additional sled tests were conducted during this past summer to determine the forces transmitted through the seat and seat anchorages under this full frontal crash condition, as well as experienced under different crash velocities, impact angles, and restraint conditions.  Component tests are now underway to assess the feasibility of developing a performance procedure.  Once those tests are completed this fall, and if the test data indicate feasibility, initiation of rulemaking proceedings could then occur.

In the area of roof strength, we conducted tests on four motorcoaches in February.  Those tests were designed to bracket motorcoach body styles (i.e., short vs. long window spacing) for a comparison of U.S. school bus and European roof strength procedures to determine the relative stringency and practicability of those differing requirements in applicability to motorcoaches.  We are now assessing those results to determine our next steps.

Emergency evacuation studies are underway to identify studies from other transportation modes and countries and then determine applicability to motorcoaches.  This involves conducting human evacuation studies and simulations under various emergency exit scenarios.  Another aspect of this effort is to examine the minimum strength requirements necessary to open emergency exits, with special consideration for young and elderly occupants and the need to balance rapid emergency egress with containment requirements to prevent ejection.

Finally, NHTSA has contracted with the National Institutes for Standards and Technology to conduct the fire safety aspects of our motorcoach safety effort.  This study is designed to review existing flammability standards and procedures and determine which might be most applicable to improve motorcoach safety.  Research on motorcoach fire propagation properties will examine the U.S. vs. European procedures for vehicle interior materials.  Wheel well mockup studies will be conducted on the tires, fuel and HVAC lines, external body panels, insulation, and wiring.  Those tests will measure flame temperatures, heat release, fire resistance of components, and propagation to the passenger compartment.  Countermeasure assessments will also be examined for fire hardening, fire detection, and fire suppression strategies.

Mr. Chairman, thank you for your consideration and this subcommittee’s ongoing efforts to improve highway safety.  I would be pleased to answer any questions.

TESTIMONY OF

EUGENE D. JUBA,
SENIOR VICE PRESIDENT FOR FINANCE SERVICES,
AIR TRAFFIC ORGANIZATION,
FEDERAL AVIATION ADMINISTRATION

ON

THE GAO’S REPORT ON

AVIATION WEATHER SERVICE RESTRUCTURING

February 26, 2008

Good Afternoon, Chairman Lampson, Congressman Inglis, and Members of the Subcommittee, my name is Gene Juba, and I am the Senior Vice President for Finance in the FAA’s Air Traffic Organization.  I am honored to be here today to discuss the findings and recommendations of the GAO regarding FAA’s provision of aviation weather services from NOAA’s National Weather Service.  FAA believes that working together with NWS, we will be able to fulfill the new requirements for aviation weather services which FAA recently sent to the NWS, and move towards a better alignment of current services with the future requirements envisioned in the NextGen Concept of Operations.

The Federal Aviation Administration is responsible for ensuring safe, orderly, and efficient air travel in the National Airspace System.  The legislative foundation of the Federal government’s regulation of civil aviation was the Air Commerce Act of 1926.  This landmark legislation was passed in the belief that the aviation industry could not reach its full potential without Federal action to establish and maintain safety standards.  The Act charged the Secretary of Commerce with fostering air commerce, issuing and enforcing air traffic rules, licensing pilots, certifying aircraft, establishing runways and operating and maintaining aids to navigation. 

The Department of Commerce continued oversight and regulation of civil aviation until 1938, when the Civil Aeronautics Act transferred Federal civil aviation responsibilities to a new independent agency, the Civil Aeronautics Authority.  In 1958, passage of the Federal Aviation Act transferred the CAA’s functions to the newly created Federal Aviation Agency, and the FAA was born.  The FAA became the Federal Aviation Administration upon the creation of the Department of Transportation in 1967, and the FAA’s becoming one of the modal organizations within the new Department. 

All through these years, the FAA and the Weather Bureau cooperated to provide weather forecast services for pilots to improve the safety of the nation’s aviation system.  A formal arrangement by which the National Weather Service would provide aviation weather services directly through co-location of NWS meteorologists at FAA facilities was established following the NTSB’s report on the 1977 crash of Southern Airways flight 242.  The NTSB’s recommendation called for the FAA to, “formulate rules and procedures for the timely dissemination by air traffic controllers of all available severe weather information to inbound and outbound flights in the terminal areas.”  Based on this recommendation, the FAA, with the assistance of the NWS, created the Center Weather Service Units (CWSU), which are located at each of the FAA’s 21 Air Route Traffic Control Centers (ARTCC) across the United States.

This relationship between the FAA and the NWS was codified in 1994, when Public Law 103-272 directed that, “The Administrator of the Federal Aviation Administration shall make recommendations to the Secretary of Commerce on providing meteorological services necessary for the safe and efficient movement of aircraft in air commerce.  In providing the services, the Secretary shall cooperate with the Administrator and give complete consideration to those recommendations.” (49 U.S.C. 44720(a))

Presently, the FAA alone spends over $200 million a year on aviation weather services, through over 40 observing systems, processes and communications services.  This is independent of the NWS spending for aviation weather forecasting and research.  FAA spends approximately $12 million a year to support the 84 NWS employees located at 21 CWSUs to provide services to FAA traffic management personnel located at the air traffic control facilities throughout the National Airspace System (NAS).  The NWS also provides aviation weather services through entities such as the Alaska Aviation Weather Office, the Volcanic Ash Advisory Centers, the Aviation Weather Center in Kansas City, Missouri, and Weather Forecast Offices.  NWS provides warning, forecasts, meteorological advice and consultation for FAA and other customers throughout all phases of flight; pre-flight, planning, and operations.

In recent years, the FAA has undertaken a number of initiatives to assess and improve the performance of the Center Weather Service Units.  FAA found that the CWSUs were not providing the same level of services at all of its locations, and the services and forecasts were not standardized across the 21 locations.  There was also little collaboration or communication between the different CWSUs.  In addition, neither the FAA nor the NWS had a formal quality assurance program for CWSU products and services. 

To address these concerns, FAA requested that the NWS restructure its aviation weather services to provide improved services in a more efficient, performance-based process.  While the NWS was developing its proposal for restructuring its aviation weather services, FAA conducted a market survey to determine if the private sector could provide the weather services FAA needed.  Ten organizations, including government laboratories and private sector firms, responded to the market survey that they could provide the services FAA requested.  The NWS submitted its restructuring proposal to FAA in October 2006.  In April 2007, FAA declined the NWS proposal for restructuring its aviation weather services provided to FAA, primarily because, in the intervening time, we had initiated an internal review of our requirements, and had not yet completed this review.  The results of that review are the new requirements which were provided to the NWS in January 2008.

However, we are serious about effective inter-agency cooperation and continue to work with the NWS on improving CWSU services.  We decided that we would refine our requirements for the services provided by the CWSUs because our existing requirements were too broad to ensure the efficiency and cost effectiveness of the services.  Also, as GAO found, FAA did not have a system in place to provide quality assurance of the services provided by the NWS, and thus could not objectively evaluate the accuracy, efficiency and cost effectiveness of the Center Weather Service Units.

The FAA agrees with the recommendations of the GAO, and in building the new requirements for the CWSU service, added a component of performance evaluation.  The performance mechanism calls for setting up a team of individuals from both FAA and NWS, which will convene regularly and monitor and provide recommendations on CWSU services based upon a negotiated set of performance metrics.  The goal of this team is to install a mechanism that will improve CWSU service on a continuing basis and enhance the FAA-NWS aviation weather relationship at the same time.  Most importantly, we must ensure that aviation weather services meet the needs of the aviation community.

In January 2008, FAA provided NWS with revised and clarified requirements.  The new performance based requirements request a new approach to how the products are generated and delivered.   The requirements address deficiencies the FAA has identified with CWSU service, such as a fragmented approach to aviation weather forecasting, with 21 aviation weather forecasts developed independently of one another, and sometimes producing inconsistent products across the NAS.  FAA has requested that forecasts across regional boundaries be consistent and that more attention be devoted to areas with “active” weather conditions, and less to areas where weather patterns are having less impact on aviation operations.  The new requirements also request CWSU services on a 24 hour a day, 7 days a week basis, rather than the current 16 hours a day, 7 days a week services.  Planes are increasingly operating on a 24/7 basis, and aviation weather services need to evolve to meet that demand.

FAA views the new requirements as moving current aviation weather services towards the FAA’s future requirements envisioned in the NextGen Concept of Operations.  The NWS is the team lead for developing the aviation weather services observing systems, forecasting services, and communications delivery systems for the inter-agency NextGen system effort, and FAA believes that the new requirements for CWSU services will help NWS better align itself with the NextGen requirements.

In conclusion, Mr. Chairman, the FAA and the NWS are doing their utmost to improve the CWSU service.  FAA has continuously held meetings with the NWS throughout the requirements development process, and continues to hold bi-weekly meetings with NWS during the proposal development process to ensure that the NWS is provided sufficient information and opportunity to develop an improved CWSU service.  We believe the NWS is committed to providing their best response to these requirements.  The FAA looks forward to the NWS’s future concept of operations for the Center Weather Service Units, and hopes to continue our cooperative relationship well into the future to reduce the impact weather has on aviation. 

We thank the GAO for their careful analysis and positive recommendations to institute performance measurements and metrics to improve the quality and cost effectiveness of aviation weather services.  We also welcome Congress’ assistance and counsel as we work with the National Weather Service to improve the efficiency and effectiveness of Center Weather Service Unit services.

This concludes my remarks, and I would be happy to answer any questions the committee may have.

STATEMENT OF

JOHN HILL,
ADMINISTRATOR
FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION

BEFORE THE

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
SUBCOMMITTEE ON Surface Transportation and Merchant Marine Infrastructure, Safety, and Security

SEPTEMBER 18, 2008

Chairman Lautenberg, Ranking Member Smith, and Members of the Subcommittee, thank you for inviting me today to discuss the Federal Motor Carrier Safety Administration’s (FMCSA) programs related to bus operations.  I am pleased to have the opportunity to discuss how FMCSA’s important programs improve bus safety and make the Nation’s highways safer.  As recently announced by Transportation Secretary Mary Peters, the total number of fatalities on the Nation’s highways declined 3.9 percent in 2007 to the lowest level since 1994.  For the bus industry, 2007 had the fewest fatal bus crashes since 2004, down 8.6 percent from 2006.  The number of fatalities in bus crashes was also 4.5 percent lower than in 2006.  The Agency recognizes, however, that every life lost is one too many, and understands fully the risk of multiple injuries and fatalities in a bus crash.  As a result, we continue to place a high priority on our passenger carrier programs.

The industry has seen many recent market changes.  For example, the economy and rising fuel prices have contributed to increased ridership and new bus companies.  FMCSA monitors the industry, remaining agile and adjusting as needed to offset the risks that these changes introduce.

FMCSA remains dedicated to developing and implementing strong safety programs to reduce crashes of buses and large trucks.  Over the past 8 ½ years, the Agency has implemented new regulations, grant requirements, processes, and penalties to make the industry safer.  During my tenure as Administrator, I have redirected FMCSA’s resources and engaged our State partners actively to complete more compliance reviews (CRs), inspections, and nationwide strike forces.  Within the last year, I visited the National Highway Traffic Safety Administration’s (NHTSA) Vehicle Research and Test Center in East Liberty, Ohio, and witnessed a motorcoach crash test to gain additional information and insight into passenger carrier safety issues.  Additionally, I rode two curbside buses to New York, NY, from Washington, DC, to understand how this emerging business model employs safety practices in its operations.

SHERMAN, TX, MOTORCOACH CRASH

Seeing the devastation of the August 8, 2008, crash in Sherman, Texas, is a solemn reminder of the need for rigorous oversight and strong penalties for unsafe carriers.  Due to the alleged unsafe behavior of the motor carrier involved, 17 people on a religious pilgrimage lost their lives and 15 others were injured.  The families and communities of these victims will suffer the repercussions for a long time.

The carrier involved in this tragic crash, Iguala Busmex, did not have proper authority to operate and was actually a reincarnation of another unsafe motorcoach company, Angel Tours, Inc., that FMCSA had placed out-of-service in June after declaring it unsatisfactory and unfit to operate.  Both of these companies were owned and operated by the same individual, Angel De La Torre.  Although the National Transportation Safety Board’s (NTSB’s) investigation is proceeding, FMCSA discovered at least three deficiencies with Iguala Busmex when the crash occurred, in addition to its not having operating authority.   

First, the tire that deflated was a recap/retread tire that had been installed on the right front steering axle, in violation of the Federal Motor Carrier Safety Regulations.  While such tires are permitted on axles at the rear of a bus, having them on a front or steering axle is prohibited by federal regulations.  Second, the carrier did not ensure that the driver was certified as meeting our medical standards.  The driver had an expired medical certificate in his possession at the time of the crash.  Third, the carrier was not conducting pre-employment drug testing.

Further, while investigating, FMCSA determined that the motor carrier was operating motorcoaches that were being used by two different motor carriers, Iguala Busmex, Inc. and Liberty Charters and Tours.  Following the discovery of this information, FMCSA dispatched additional investigators.

FMCSA discovered that Angel De La Torre was involved in managing at least some aspects of Liberty Charters and Tours.  Based on these findings, FMCSA issued an imminent hazard out-of-service order on August 12th prohibiting Liberty Charters and Tours from using drivers or vehicles that were under the control or employ of Angel Tours, Iguala Busmex, or Angel De La Torre.  The Agency issues imminent hazard out-of-service orders when continued operation of the company increases substantially the likelihood of serious injury or death.

The bus involved in the Sherman crash had been inspected as recently as July 31^st, and did not have a retread tire at that time.  However, FMCSA’s continuing investigations demonstrate the extent to which some motor carriers go to defy laws and regulations.  They represent the most egregious carriers with which we must contend.  Fortunately, these carriers represent the minority of the industry.  Most of the 3,938 active interstate motorcoach carriers operating 33,250 vehicles operate properly and deliver their passengers safely.

UPDATE ON FMCSA’S NATIONAL BUS SAFETY PROGRAM

When I testified before your House colleagues in March 2007, I explained that FMCSA’s National Motorcoach Safety Program emphasizes six areas:  (1) increasing the number of motorcoach CRs; (2) ensuring passenger carriers have a higher priority within FMCSA’s CR prioritization system, known as SafeStat; (3) establishing formal bus inspection programs within all States; (4) improving the collection and analysis of safety data; (5) reducing motorcoach fires; and (6) expediting safety audits of new entrant passenger carriers.  Over the past 14 months, FMCSA has made considerable progress in each of these areas.

Motorcoach Compliance Reviews

In Fiscal Year 2005, FMCSA and its State partners completed CRs on 457 motorcoach companies.  FMCSA increased this number to more than 600 in FY 2006.  I am pleased to report that this was more than doubled in 2007 to 1,304.  In FY 2008, the Agency has completed 1,257 motorcoach CRs to date.  FMCSA continues to adjust its resources and goals to reach more motorcoach carriers.  I would like to take this opportunity to commend FMCSA’s State partners and the Commercial Vehicle Safety Alliance (CVSA), who have been instrumental in helping exceed these goals.

Passenger Carrier Enhancements to the SafeStat System

Directly related to FMCSA’s CR program is the Agency’s modification of the algorithm used in the SafeStat system.  FMCSA and State enforcement inspectors use the SafeStat system to identify high risk motor carriers in need of Agency oversight.  The Agency recognizes that bus companies should receive the utmost program attention and enforcement resources.  As a result, FMCSA has revised its SafeStat CR prioritization system to address the additional risks associated with passenger transportation by applying more stringent safety standards for passenger carriers.  Under the revised system, FMCSA has identified additional groups of passenger carriers as its highest priorities for CRs.  These groups include passenger carriers with less than satisfactory ratings, those with operational data showing violations, and passenger carriers that have not been reviewed in the last five years.

Prior to the implementation of this new algorithm, 101 passenger carriers were on the prioritized CR list.  Under the new system, FMCSA will now be reviewing 889 passenger carriers on the priority list, nearly double the number of passenger carrier CRs in FY 2005.

Bus Inspections

For the past two fiscal years, FMCSA’s State partners have been required to include a bus inspection program in their Commercial Vehicle Safety Plan (CVSP) in order to receive funding under the Motor Carrier Safety Assistance Program.  As a result, 147,686 bus inspections were completed in FY 2007, which is 160 percent higher than the 56,084 bus inspections conducted in FY 2005.  In FY 2008, 140,448 inspections have been conducted to date.

The FMCSA has continued to augment its program with bus strike forces to focus attention on passenger carrier safety.  The most recent strike force was conducted August 4-16 and spanned all 50 States and the District of Columbia.  Federal and State personnel from numerous law enforcement agencies participated in the strike force, completing approximately 12,000 safety inspections on vehicles and drivers.  As a result, 1,200 buses were placed out of service.

Improved Safety Data

The results of these increased efforts remove unsafe drivers and vehicles from the road and give the Agency additional data on passenger carriers that can be used to further research, program initiatives, and risk assessment on carriers and drivers.

FMCSA is currently completing a Bus Crash Causation Study.  Based on the data analysis to date, it appears that, like the Large Truck Crash Causation Study (LTCCS) issued in November 2005, other vehicles and drivers were responsible for the crashes in more than half of the cases (20 out of 39).  In addition, where the critical reason for the crash was assigned to the bus driver, the crash was the result of driver errors including inadequate surveillance, inattention, and following too closely.  Only four crashes were related to vehicle malfunctions.  In two cases, brakes failed and in the other two there were fires.  The Agency will continue its efforts to increase focus on both commercial motor vehicle (CMV) and non-CMV drivers.

Bus Fires

On July 24, 2007, FMCSA published a Federal Register notice to advise that fires must be treated as crashes concerning reporting requirements.  Motor carriers must now include fires on their accident register and law enforcement agencies should capture the information on their State Accident Reporting System.  The additional data from this change improves significantly FMCSA’s fire data collection and analysis efforts.

The FMCSA, through the Department’s Volpe National Transportation Systems Center, developed a national motorcoach fire database and completed a fire safety analysis.  This study reviewed more than 500 fire incidents over the last 10 years using information from FMCSA’s Motor Carrier Management Information System, the Department of Homeland Security’s National Fire Incident Reporting System, and individual State accident reporting data.  The study recommended focusing on improving the effectiveness of State and Federal motorcoach inspection practices to identify mechanical conditions that can cause fires.  With this information, FMCSA worked with the CVSA to change the out-of-service criteria to include oil leaks in wheel hubs and frayed or damaged wiring on bus electrical systems.

The FMCSA is expanding the original study to include newly available fire information from 2004 to 2008.  This will allow the Agency to examine newer motorcoaches that may be equipped with automatic fire detection and suppression systems and evaluate the efficacy of such safety devices.  Recently, FMCSA entered into a partnership with NHTSA’s Special Crash Investigation unit to evaluate fire incidents on motorcoaches and conduct detailed engineering root cause analysis.  A team of NHTSA technical experts will travel to motorcoach fires to perform an engineering analysis to determine whether root cause engineering data can be obtained that will indicate why the fire occurred and whether a primary contributing factor can be identified.

New Entrant Passenger Carriers

As reported in July 2007, FMCSA established an internal goal to complete the new entrant safety audits for passenger carriers within 9 months, rather than the 18 months provided in the originating statute.  In FY 2007, FMCSA completed 86.6 percent within 9 months and 94.7 percent within 18 months.  For FY 2008, to date, the percentages are 83.5 percent and 94.8 percent, respectively.  On average, a safety audit is conducted on a new motorcoach carrier within 4.5 months.

The Agency expects publication of the final rule on the New Entrant Safety Assurance Process later this year.  At present, the rule is in the final stages of Departmental review.  The notice of proposed rulemaking published on December 21, 2006, recommended strengthening the standards for all motor carriers and requiring verification and education about the requirements of the Americans with Disabilities Act (ADA) during the safety audit.  Changes in this program will contribute significantly to starting new carriers off right and will enable FMCSA and its State partners to identify unsafe carriers and ensure the early correction of unsafe practices.

CURRENT AND FUTURE AUTHORITIES

While these six National Motorcoach Safety Program initiatives have resulted in significant enhancements to our safety programs, FMCSA continues to use its current authority and looks for additional authority that would eliminate loopholes, identify more unsafe carriers, and make the industry safer.  Recently, FMCSA received additional direction through the Over the-Road Bus Transportation Accessibility Act of 2007 (P. L. 110-291), signed into law by President Bush on July 30.  This legislation clarifies the Agency’s role in considering ADA compliance before operating authority is granted and authorizes the Agency to revoke operating authority based on willful noncompliance with DOT’s ADA regulations.

I am pleased to report that FMCSA met the requirement of the Act to “take necessary actions to implement the changes required” within 30 days.  To that end, the Agency has provided staff with the needed procedures and direction for implementation.  In addition, we have initiated the development of the Memorandum of Understanding (MOU) with the Department of Justice, as required by the statute, and are on target to complete the MOU by the 6-month statutory deadline.

The Safe, Accountable, Flexible, Efficient Transportation Equity Act:  A Legacy for Users (SAFETEA-LU) established the Motor Carrier Safety Advisory Committee (MCSAC) to provide advice and recommendations on motor carrier safety programs and motor carrier safety regulations.  The MCSAC recently recommended several reauthorization proposals to the Agency for consideration.  We are now reviewing the advisory committee’s recommendations.  The Agency’s next reauthorization will be critical in providing the tools and resources needed by FMCSA to create an even more robust safety program.

To ensure that noncompliant carriers are not attempting to evade detection by creating new motor carriers, the Agency has implemented a vetting process for new passenger carrier operating authority applicants.  This process compares available applicant information to existing carrier information.  FMCSA’s algorithm identifies common characteristics such as names, addresses, phone numbers, e-mail addresses, vehicles, drivers, and insurance policy information.  If similarities are detected, FMCSA investigates further.

The application is vetted by FMCSA and with the appropriate State agency.  If an affiliation with a carrier with an unsafe record is detected through this vetting process, the applicant is required to provide additional documentation.  FMCSA will deny authority to any unsafe carrier attempting to reestablish itself as a new carrier.

DRIVER ISSUES

The FMCSA continues to monitor other areas of concern including driver health, driver fatigue, and the impacts of non-CMVs around large trucks and buses.  In April 2008, FMCSA began a 24-month research study specific to motorcoach driver fatigue.  This research will gather empirical data on motorcoach driver schedules to help bus companies better manage fatigue in their driver operations.

The Agency continues to focus on driver information available through our existing systems.  FMCSA developed the Driver Information Resource (DIR) in response to SAFETEA-LU.  The DIR is a Web-based tool that allows a user to search by driver for a driver’s crash and inspection history, regardless of a driver’s employment history.  FMCSA and State enforcement staff continue to use this tool to access driver-specific data.  The Agency expects to make this information available to the motor carrier industry as a part of the pre-employment verification process.  Approved companies would distribute the information to inquiring motor carriers with the driver’s approval.  The system is to be accessible by motor carriers in 2009.  This will result in bus and truck companies hiring safer drivers or risking consequences for employing unsafe operators.

Additionally, FMCSA’s Comprehensive Safety Analysis 2010 (CSA 2010) program will address driver-specific issues.  CSA 2010 will collect and manage driver specific data and target drivers and carriers based on these data.

NTSB RECOMMENDATIONS

FMCSA has been responding to a number of NTSB motorcoach recommendations.  Several of these recommendations relate to two FMCSA rulemakings:  “Medical Certification Requirements as Part of the Commercial Driver's License” and “National Registry of Certified Medical Examiners.”  The Medical Certification final rule and the National Registry notice of proposed rulemaking are currently under review.  We anticipate publishing both of these rules later this fall.

In addition, in response to a NTSB recommendation, FMCSA partnered with the American Bus Association (ABA), the United Motorcoach Association (UMA), and the CVSA to develop and distribute a booklet entitled, “Motorcoach Brake Systems and Safety Technologies.”  More than 4,000 copies were distributed and the document is accessible on the FMCSA Web site.

FMCSA has developed a new algorithm to change the prioritization of motorcoaches in the SafeStat system.  As a result, FMCSA has requested that the NTSB close the related recommendation.

Additionally, FMCSA recently requested closure of three other recommendations related to the publishing of pre-trip safety guidance in the Federal Register and development and publication of outreach materials.  30,000 brochures, 20,000 audio CDs, and 6,000 posters have been distributed.  In addition, these materials were posted on FMCSA’s Web site.  The Agency continues to target non-traditional motorcoach users and operators, such as church and school groups.

Finally, another recommendation relates to developing a national bus fire database and studying the causes, frequency, and severity of bus and motorcoach fires.  As I explained earlier in my statement, FMCSA has engaged the Volpe Center and NHTSA to provide assistance in this effort.

PARTNERSHIPS

It must be noted that FMCSA could not have made these accomplishments without our partnerships with other DOT agencies such as NHTSA and the Federal Transit Administration, other Federal agencies, State and local law enforcement agencies, and organizations such as the American Bus Association, the United Motorcoach Association, and the Commercial Vehicle Safety Alliance.  These critically important relationships help to bring issues to light and strengthen the industry.

CONCLUSION

Mr. Chairman, I would like to reiterate FMCSA’s dedication to bus safety.  Our agency works each day to ensure that every passenger arrives home safely to loved ones from every trip.  In the history of CMV enforcement and regulatory oversight, we now have more inspections, more CRs and timelier new entrant audits, and greater outreach and education than ever.  In advance of the Sherman tragedy, FMCSA took strong steps to ensure the safety of our highways.  We identified a carrier as unsafe, conducted a thorough investigation, and determined the carrier to be unfit, placing it out of service.  Sadly, the owner of the company that had been placed out of service chose to ignore his passengers’ safety by disregarding the rules intended to protect them.  This willful negligence has no place in the future of American transportation.  Our agency is dedicated to finding and stopping such operators before they commit these atrocious acts.

While we are seeing a reduction in the total number of fatalities each year, FMCSA recognizes that much work remains.  Please be assured of my continued personal commitment to reducing these fatalities further and making our Nation’s highways even safer.  Thank you for the opportunity to testify before you today about this important issue.  I also commend the Subcommittee for continuing to focus on bus safety to increase protection of the American people.  I would be happy to respond to any questions you may have.

Statement of

The Honorable D.J. Gribbin
General Counsel,
U.S. Department of Transportation

Before the

U.S. House of Representatives
Committee on Transportation and Infrastructure
Subcommittee on Aviation

Concerning

Aviation Congestion Management

June 18, 2008

Introduction

Mr. Chairman and members of the Subcommittee, thank you for the opportunity to testify again on the Department of Transportation’s (DOT) continuing efforts to address aviation congestion. 

Status of the industry

Before I go into detail about the DOT’s efforts to address congestion, I want to take a moment to talk about the particularly challenging environment currently facing the airlines.  As my fellow panelists well know, record oil prices, a slowing economy, and increased competition are just a few factors that have created a number of significant challenges for airlines – challenges that certainly will change the face of the aviation industry in the years to come. 

To meet these challenges, many carriers are raising fares, streamlining operations, and reducing service.  It is possible that some of these measures will result in reduced congestion – however, so far we have yet to see widespread evidence of carriers pulling out of the busiest (and most congested) airports.  Although, Continental announced just last week that they are eliminating service to 15 communities, it is likely that the busiest and most congested airports will not see an overall reduction in service – and even if there is a reduction, history tells us that the aviation industry is very cyclical and that service will return to – and exceed – the record levels we saw last year.

In 2007, the aviation industry recorded the second worst year for delays since 1995; 27% of flights were delayed or cancelled in 2007.  Both the frequency and the severity of ground delays were unprecedented.  The costs of delays are huge – the Senate Joint Economic Committee estimates that last year flight delays alone cost passengers, airlines, and the U.S. economy over $40 billion.  Additionally, the Travel Industry Association estimates that air travelers avoided over 41 million trips last year – leading to lost revenues and taxes of over $26 billion. 

The cost of delays and congestion to the U.S. economy is huge and that is why, even if carriers reduce flights this summer enough to reduce congestion, we still must do something to fix the problems that caused last summer’s horrible delays.  We simply cannot wait until there is another summer of record delays before we do something to fix the system.  That is why the Department will continue working on its initiatives to address congestion and introduce competition at capped airports. 

LaGuardia/JFK/Newark Background:

As you all know, the Department recently published notices of proposed rules intended to manage congestion at LaGuardia Airport (LaGuardia), John F. Kennedy International Airport (JFK), and Newark Liberty International Airport (Newark).  We believe these proposals will ultimately provide travelers with more reliable service while maintaining competition among the many carriers in a vibrant New York market. 

Congestion at these three New York airports is not a new phenomenon.  Since 1969, the High Density Rule (HDR) has effectively capped LaGuardia to a limited number of operations per hour and capped JFK during its peak hours.  Although Newark was once subject to the HDR, the FAA suspended its application in 1970 due to the fact that capacity was meeting demand.  In recent years, however, operations have bogged down to the point where Newark is now one of the most delay-prone airports in the country. Current and anticipated demand during peak hours at all three airports approaches or exceeds runway capacity, causing volume-related delays, which can be aggravated by weather or other operating conditions.  Operational improvements have not increased the capacity of the New York area to a point where the unconstrained demand for air service can be met without excessive congestion.  Therefore, for now, all three airports are capped.

Straight caps without some mechanism to ensure an efficient allocation of scarce slot resources is economically inefficient and, therefore, not our preferred option.  Our preference is to see airports address their challenges locally through implementation of capacity enhancing projects or procedures, whenever possible.  However, the federal government will be involved once a congested airport impacts the rest of the national airspace.  In this case, New York air congestion causes delays throughout the U.S., so the federal government cannot ignore the problem.  Given the urgent need for action, caps were necessary at the New York City area airports. 

When we consider economic regulatory issues, the Department has a statutory obligation to place maximum reliance on competitive market forces and on actual and potential competition.  We know, however, that caps hinder the ability of air carriers to initiate or expand service at capacity constrained airports.  Therefore, when seeking a solution to the aviation congestion issues that we currently face in the New York area, the Department must act to both promote competition by permitting access to new entrants, and to recognize the long-term investments in airports made by existing carriers.  We do not believe that a simple imposition of caps without some mechanism to preserve competitive market forces benefits aviation consumers or the airlines.

With this in mind, we have set forth proposals for the New York area airports that we believe would reduce congestion the smartest way—by using market incentives to assist in the efficient allocation of airspace.  Although market-based mechanisms are the most effective way to allocate scarce resources—like slots—we have taken a very conservative approach to introducing these mechanisms with this proposal.  The vast majority of hourly operations at the airport, as much as 90 percent or more, would be “grandfathered” and leased to the existing operators for non-monetary consideration.  The market-based aspect of our proposal involves auctioning off leases for only a limited number of the remaining slots. 

Are there alternatives to caps and auctions?

Expanded Capacity

Some have incorrectly suggested that expanding capacity should be the only government response to congestion in New York City and around the country.  This view largely ignores the tremendous short-term opportunities to utilize existing capacity more efficiently.  It also ignores the physical, economic, and political constraints on capacity expansion in many parts of the U.S. aviation system.

The Department shares the view that expanded capacity is a critical component of the long-term solution to relieve congestion and get travelers to their destinations on time and in a humane fashion.  We are intensely focused on such solutions, both at the FAA with implementation of the Next Generation Air Transportation System (NextGen) and at the Department level.  The FAA is hard at work bringing new technology and techniques on-line to unsnarl air traffic delays, and we appreciate the funding Congress has appropriated for these purposes.  In recognition of these critical enhancements, the President’s FY 2009 Budget Request would more than triple the investment in NextGen technology – providing $688 million for key research and technology to help meet the nation’s rapidly growing demand for air travel, including the transformation from radar-based to satellite-based air traffic systems. 

The FAA will begin rolling out several elements of the NextGen system this summer.  This rollout will include the national debut of Automatic Dependent Surveillance-Broadcast (ADS-B) technology in Florida.

The FAA has chosen Miami as the key site for the installation and testing of Traffic Information Services – Broadcast (TIS-B) and Flight Information Services – Broadcast (FIS-B).  These broadcast services are the transmission of weather and traffic information to the cockpit of properly equipped aircraft. In order to provide the services in roughly the southern half of the state, the contractor, ITT will install and test eleven ground stations in this area, including five at airports (Lakeland Linder Regional, Dade-Collier, Florida Keys Marathon Airport, Boca Raton Airport, and Sebastian Municipal).    

The ITT installed equipment is currently undergoing a Service Acceptance Test (SAT) which began in May.  In November 2008, the agency expects to commission (the FAA calls this an In-Service Decision or ISD) these broadcast services (TIS-B and FIS-B).  Following the successful completion of ISD, the FAA can exercise an option in the ITT contract to deploy the services nationwide

The transition to ADS-B technology will allow the nation's air traffic control system to change from one that relies on radar technology to a system that uses precise location data from a global satellite network.  Over the next few years, the FAA will also install and test ADS-B for use in Air Traffic Control Separation Services.  The key sites for this initiative are Louisville, Philadelphia, the Gulf of Mexico, and Juneau.  The FAA plans to commission the ADS-B services in September 2010 and complete a nationwide rollout by 2013.

The FAA also recently completed stage 1 implementation of its Airspace Redesign Project for the New York, New Jersey, Philadelphia area.  The goal of the Airspace Redesign Project is to enhance the efficiency and reliability of the airspace structure and the air-traffic control system for pilots, airlines and the traveling public.  The project modernizes the structure of the air traffic environment in an environmentally responsible manner, while laying the foundation for NextGen.  Moreover, it will help to accommodate growth while enhancing safety and reducing delays.  While airspace redesign will provide greater efficiencies and some congestion relief, it is not a complete solution.

The Department looks to increase capacity both in the air and on the ground whenever possible.  Our support for expansion of O’Hare International Airport is one concrete example.    The fruits of these efforts became clear on Monday when the FAA announced that it would allow the flight caps put in place at O’Hare in 2004 to expire because of the additional capacity the airport will gain from its new runway.  Capacity increases must be part of the solution, particularly since we expect demand for air travel to resume its robust growth over the coming decade, despite the current temporary pause due to economic conditions.  This is especially true in the nation’s busiest metropolitan areas.  However, capacity increases, both physical and operational, often take a long time to implement and may be limited in scope.  Sometimes physical capacity cannot be expanded, such as at LaGuardia Airport.  Operational improvements can help to address congestion, but sometimes they cannot provide enough capacity to meet demand.  For example, in New York, even with the implementation of all the operational improvements initially suggested by the Air Transport Association (ATA) and the Port Authority, congestion was expected to double this year, assuming the FAA took no further action and the airlines moved forward with planned increases in their schedules. 

There are additional solutions.  Basically, we have a choice between two fundamentally different approaches – administrative remedies and market-based solutions.  We believe that outdated government policies relying on administrative remedies alone have led to an inefficient allocation of the airspace, and that moving towards a system that includes market-based solutions will reduce these inefficiencies and contribute to an improved flying experience for air travelers.

Administrative Allocation

Instituting administrative remedies, such as caps, is an effective, but not efficient way to reduce delays.  Limiting the number of flights into an airport will reduce congestion at that airport.  The Department decided to institute a short-term cap at JFK and Newark airports because something needed to be done to avoid a repeat of the flight delays that we experienced last summer.  However, caps are not the best solution for improving travel options for passengers.

Airlines are often enthusiastic in their support of caps at an airport they already serve.  When a cap is established, incumbents are protected because they typically maintain their market share and the potential for new competition is diminished.  The incumbent airlines’ support for such a policy makes sense, because limited competition makes them more profitable and protects them from new entrants that might want to compete by offering lower fares. 

Although caps protect existing airline business, they also prevent airlines from adding capacity at an airport unless they are able to obtain a slot from a competitor.  As a result, one of the best-known problems with slots is that they encourage airlines to “babysit” slots, i.e., underutilize the slot by flying multiple small aircraft into an airport to maximize the number of slots an airline can occupy at the lowest possible cost.^[1]  As a result, slots do not always go to those who value them the most and who will use the capacity in the most efficient manner.

This limitation on capacity and competition naturally leads to fare increases at an airport, because it creates a scarce commodity, and passengers pay a premium for that commodity. 

If caps are not the long-term answer, then the question arises – what is the solution?

Market-Based Remedies

Alfred Kahn, an airline economist and former Chairman of the Civil Aeronautics Board, said:  “Whenever competition is feasible, it is, for all its imperfections, superior to regulation as a means of serving the public interest.”  Secretary Peters echoed that sentiment when she said:  “Our preference is to find a way to let market incentives do the job, and not to return to the days of government-regulated flights and limited competition.”  Although the Department instituted caps as a short-term measure, we continue to explore market-based remedies as a long-term solution to congestion. 

It is clear that the current system does not allocate airspace capacity efficiently.  Solving that problem, however, should not entail government picking "winners and losers," particularly when, as currently structured, everyone involved in air travel feels like they are the loser—both those getting terrible service and those getting blamed for providing terrible service.

Market-based pricing has been demonstrated time and again as the most effective way to allocate a scarce resource that is in high demand.  Space in a movie theater, use of cell phone infrastructure, or flights during certain times to certain destinations are all examples that illustrate that such pricing works.  Pricing can balance demand with available capacity, resulting in less congestion and more reliable schedules.  Also, pricing sends better signals as to where the system needs extra capacity, and it can supply the revenues to add such needed capacity. 

Changing from the traditional, increasingly inefficient administrative controls to a market-based system has generated a fair amount of concern, primarily from the airlines.  Change is difficult, and the airlines’ concerns are understandable.  In fact, very similar arguments were made by the airlines in opposition to deregulation.  Concerns were raised about disruption to the industry, lack of a track record, and disruption to business models. However, the ATA Airline Handbook includes a long list of benefits that resulted from deregulation.  The Handbook notes that deregulation stimulated competition, led to rapid growth in air travel, and reduced fares by more than 50% in real terms.  We believe that market-based remedies directed at congestion will improve airline service like deregulation did.

Why caps must be combined with auctions – and how it will result in lower fares

Implementing caps without any additional market-based mechanism for encouraging competition only increases the cost to consumers, since a lack of competition keeps fares high.  A March 2001 Government Accountability Office (GAO) report found that “dominated markets tend to have higher airfares than airports that have more competition from other airlines.”  Fares in dominated markets averaged 41 percent higher than in markets where there was aviation competition.  The difference in fares is largely attributed to the exclusive access granted to incumbent airlines and the incumbent airlines’ ability to prevent new entrants from gaining entry to create a competitive market.  Instituting slots without a market-based mechanism creates just this exclusivity of access by granting extensive landing rights to incumbent airlines and barring new, competitive entrants into the country’s busiest airports.

Granting slots without market-based mechanisms creates a system where incumbent airlines fight to maintain large shares of the airport traffic and to limit the ability of low-cost carriers to compete.  The 1996 DOT report Low Cost Airline Service Revolution details this anticompetitive culture at capped or dominated airports.  The report identifies slot hoarding as one of the key characteristics of such a culture.  Federal regulations require airlines to use their slots at least 80% of the time in order to retain possession of them.  However, by splitting up larger flights into smaller ones (“downgauging”) or by setting up a rotating schedule, airlines have unnecessarily taken up more slots than they would require to competitively serve their customers.  Slot hoarding prevents new entrants from taking available slots and increases airplane throughput without increasing passenger throughput, adding greatly to congestion.  The report maintains that the high fares charged at these dominated airports create incentives for an airline to use anticompetitive measures to discourage new entrants.

Using the historical backdrop of slots as a guide, we believe that integration of a market-based system into the proposal for slot caps is necessary to protect consumers and a competitive market.  Estimates from the DOT’s 1996 report valued savings from new entry competition at 35 percent for round-trip flights and 40 percent for one-way flights.  A case-specific study on the effect of Southwest Airlines noted that with the opening of just one route between Oakland International Airport and Ontario International Airport in Los Angeles, fares dropped 60% and traffic tripled, increasing both passenger throughput as well as savings for consumers.  Even nearby airports not directly offered service experienced a decrease in fare costs of up to one-third.  Southwest is just one example of low-cost carriers whose entry into the market drove down prices and increased passenger throughput at previously dominated airports.

What have we proposed?

Last month, the FAA published notice of a proposed rule that would replace the orders imposing operating limits at JFK and Newark and establish a new rule limiting operations at these airports.  Instead of reliance on repeated piecemeal approaches to limit and manage operations at JFK and Newark, we believe a better course is to adopt a longer-term rule dealing with the congestion and delays that we expect to persist at those airports.  Although we continue to work toward capacity improvements, this proposal will complement capacity enhancement efforts.

Like the proposal for LaGuardia that I discussed the last time I was before this Committee, this proposal recognizes that a simple imposition of caps without some mechanism to ensure preservation of competitive market forces is inadequate.  While this proposal is similar to and intended to mesh with the LaGuardia proposal, neither is reliant on the other for final action. 

Under the proposal for JFK and Newark, all airlines operating at Newark and JFK would be given up to 20 slots a day for the 10-year life of the rule.  The proposal offers two options for JFK.  Under the first, 10 percent of the airline’s slots above the 20-slot baseline would be made available via an auction.  The revenue from those auctions would then be invested in congestion and capacity improvements in the region.

Under the second option for JFK, the airlines would auction 20 percent of slots above the 20-slot baseline and keep all of the proceeds.  Depending on the option, between 91 and 179 slots at JFK would be affected out of 1,245 total slots at the airport.

The proposal also calls for auctioning 10 percent of slots at Newark Airport above the baseline annually for the first five years of the rule.  As a result, only 96 slots out of a total of 1,219 slots at the airport would be auctioned over the 10-year span of the proposal.

As with any pricing plan pursued by the Department, this proposal for JFK and Newark complies with our international obligations and will not competitively disadvantage domestic carriers.  Under this proposal, foreign carriers and domestic carriers are treated the same.

As with the LaGuardia proposal, under this proposal, airlines operating at the two airports would receive a 10-year interest in some of the world’s most valuable aviation assets, free of charge, free of question, and free of hassle.  Additionally, this proposal – just like the LaGuardia proposal – increases competition by creating a robust secondary market for trading of slots and allowing a way for new entrants to gain entry into a restricted airport. 

Conclusion

Mr. Chairman, I appreciate the opportunity to explain to you our proposals for the New York-area airports.  We are firmly committed to the idea that any long-term solution to mitigate congestion in the Nation’s airspace must include a market-based mechanism.  Caps alone have proven to be insufficient, and perpetuating the kinds of delays we experienced in the summer of 2007 is not tolerable. 

I would be pleased to provide you or your staff with any additional information that might help explain our proposals and I would be happy to answer any questions you might have. 

Statement of

The Honorable D.J. Gribbin
General Counsel,
U.S. Department of Transportation

Before the

United States Senate
Committee on Appropriations
Subcommittee on Transportation, Housing, and Urban Development
and Related Agencies

Concerning

Airline Scheduling Practices and Airspace Design

April 25, 2008

Mr. Chairman and Members of the Committee, thank you for the opportunity to testify today. Allow me to use this time to update you on the initiatives taken by the Office of the Secretary and the Federal Aviation Administration (FAA) to address the issue of flight scheduling practices as it relates to the broader issues of airline delays and consumer protection.

The Administration identified the need to respond to the growing consumer impacts of aviation system delays over a year ago. Since then, we have taken a series of important steps, including the President’s announcements related to holiday travel. At the direction of Secretary Peters, our Department has developed a comprehensive list of initiatives designed to improve air travel and reduce the impacts of lengthy delays on consumers. While we have maintained a strong focus on short term actions, it is imperative that we not lose sight of the ultimate objective: establishing a sustainable and economically efficient aviation policy that actually reduces delays, not simply treats the symptoms. In order to accomplish this objective, it is important that we reform our economic model for air traffic control services and airport pricing similar to what the Administration proposed last year. Without changes of this magnitude and regardless of regulatory actions pursued, it is inevitable that millions of Americans will experience unreliable air travel options and growing dissatisfaction with the performance of the U.S aviation system.

I. The Problem

We are all too familiar with the litany of statistics that demonstrate without question that action is needed on behalf of air travelers and the aviation sector of the national economy. One of the most compelling statistics is that last year almost 2 million flights operated by large air carriers did not land on time because they were delayed, cancelled, or diverted. That is almost 27 percent of the operations reported by these carriers. Imagine any other business telling its customers that 27 percent of the time the service they paid for is not available as advertised. The Administration has made commitments at the highest levels to address this problem. When Secretary Peters met with President Bush last September, he said, “We’ve got a problem, we understand there’s a problem, and we’re going to address the problem.”

Unfortunately, Philadelphia is not immune from the problems experienced by many air travelers.  The departure and arrival statistics for Philadelphia International Airport (PHL) provide the proof as recorded by the Department’s Bureau of Transportation Statistics (BTS).  In 2007, Philadelphia International Airport ranked fifth worst of the 32 major airports in the percentage ranking for on time arrivals—only about 67 percent of flights arrived on time.  Similarly, PHL ranked fourth worst of the 32 major airports in on-time departures for 2007 with approximately 70 percent of flights departing on time.

I think we all agree that the air traveler deserves a better approach. Last year, according to the American Customer Satisfaction Index, the satisfaction level with the airline industry overall fell to its lowest level in 7 years. The statistics we gather monthly at DOT confirm deteriorating service levels. In 2007, there was a sharp rise in the number of complaints received by the Department – 13,168 complaints, which is over 58% more than the 8,325 complaints received in 2006. Complaints are continuing at a high rate in 2008 – the Department received 3,152 complaints during the first quarter of this year. For us, the objective is not to parcel out the blame, but to get to the root of the problem – congestion. Consumer satisfaction would be vastly improved if flights simply arrived on schedule. The growing lack of reliability in air travel these days is one of the most significant impacts of congestion.

II. DOT Actions

The Department began to address flight delays and related consumer issues over a year ago. In February 2007, the Administration sent Congress a comprehensive plan for transforming our aviation system to meet our present and future needs. A central reform of the Administration’s proposal was the overhaul of the FAA’s financing structure to replace the decades old system of collecting ticket taxes with a stable, cost-based funding stream and to facilitate equipping our aviation system with modern Next Generation Air Transportation System (NextGen) technology. The proposal creates a stronger correlation between what users pay and what it costs the FAA to provide them with air traffic control services; thus, providing price incentives for systems users to reduce delays.

Flight delay problems – including cancellations and missed connections – are the number one air traveler complaint. That is why addressing aviation congestion is a critical component to improving consumer satisfaction with the aviation industry. The year 2007 was the second worst year for delays since 1995, and the first two months of 2008, while slightly better, are the third worst for flight delays during that time of year. Since one-third of the air traffic moves through New York airspace, the three airports in the New York City metropolitan area had the highest percentage of delayed flights last summer, and delays in New York cascade throughout the system, the Department chose to focus its initial efforts in the New York area.

Given the record delays last summer, in July 2007, Secretary Peters formed an internal New York Air Congestion Working Group and tasked them with developing an action plan to reduce congestion and delays at airports in the New York City region and improve customer satisfaction. The working group developed a plan, which included establishing a New York Aviation Rulemaking Committee (ARC), holding scheduling reduction meetings, implementing operational improvements, and enhancing customer satisfaction. Since forming the New York Air Congestion Working Group, the Department has taken a number of actions to implement the working group’s recommendations.

A. Aviation Congestion Mitigation Efforts

Last September, Secretary Peters formed a New York Aviation Rulemaking Committee (ARC), which was composed of representatives from passenger and cargo airlines operating out LaGuardia, John F. Kennedy International (JFK), Newark Liberty International (Newark), and Teterboro Airports, airline and airport trade associations, the Port Authority of New York and New Jersey (Port Authority), passenger rights advocates, and representatives from FAA and DOT. The ARC had the monumental task of researching and vetting the options for reducing congestion in New York’s major airports over the course of merely three months. The Administration wanted to have a robust discussion and input from all interested parties before moving forward with a policy action.

Incorporating the information received from the ARC, the Department is undertaking several actions to address aviation congestion in New York.[1] These actions include:

• Caps on hourly operations at JFK;
• Proposed caps on hourly operations at Newark;
• Completion of 8 of the 17 airport and airspace recommended operational improvements identified by the Air Transport Association (ATA) and the Port Authority of New York and New Jersey. We expect to complete the remaining 9 recommended improvements by summer 2008;
• Establishing an executive-level Director position at the FAA to head the New York Area Program Integration Office;
• Further implementation of New York/New Jersey/Philadelphia airspace redesign; and
• Proposed amendments to the Airport Rates and Charges Policy.

During the holiday season, the Department also instituted other measures to mitigate flight delays, such as negotiating an agreement with the Department of Defense to open military airspace for commercial use. We are also continuing our outreach efforts with various stakeholders, including consumer groups, airports, and airline CEOs.

We are making better use of our skies to limit the impact weather has on travelers. Last week, the Secretary announced new air traffic measures designed to help cut delays this summer. The first involves new and greater flexibility for aircraft to use alternative routes in the sky to avoid severe weather. This includes a new routing alternative that provides an “escape route” into Canadian airspace from the New York metropolitan area so airlines can fly around summer thunderstorms and high winds. In addition, the FAA will open a second westbound route for aircraft, akin to adding another interstate highway lane in the sky. This would in effect provide a parallel route along a heavily-traveled aviation corridor, helping cut westbound delays from the New York area.

Straight caps (hourly limitations on flight operations during certain peak hours) without some mechanism to ensure an efficient allocation of scarce slot resources is not economically efficient and, therefore, not our preferred option. Given the urgent need for action, however, it was necessary at the New York City area airports. The Port Authority elected not to pursue various delay reduction approaches, and the President and Secretary Peters would not tolerate delays like those that occurred last summer. The caps at JFK took effect on March 30, and we expect to issue a final order for Newark soon (the comment period on the notice proposing caps at Newark closed on April 1). The caps at JFK (and Newark, if adopted,) are scheduled to expire on October 24, 2009. It is also worth noting that because it is so heavily influenced by events in New York airspace, Philadelphia stands to gain from improvements that can be made in the New York area.

We still believe that there is a need for market-based measures to allocate capacity, and the Department continues to explore such measures. For example, there are options available to airports in lieu of caps. Our preference is to see airports address their challenges locally; however, the Federal Government will be involved once a congested airport impacts the rest of the national airspace. New York air congestion causes delays throughout the U.S.

In January, we issued a notice that proposed providing airports with a new and useful tool to price access to their facilities better. The FAA proposal would make three changes to the airports rates and charges policy. The first change would clarify that airports may use a two-part fee structure with an operation-based and weight-based element. The second change would permit an operator of a congested airport to charge for work under construction. Finally, the third change would expand the authority of an operator of an airport system to charge users of the congested airport in the system for the airfield costs of other airports in its system. If adopted, the amendments would allow a congested airport to charge prices commensurate with the true costs of using its runways. In return, this will provide users better incentives to consider alternatives, such as scheduling flights outside of peak demand times, increasing aircraft size to use the congested runways more efficiently or meeting regional air service needs through alternative, less congested facilities. The comment period ended on April 3, and we hope to act on the proposal soon.

Per landing charges are a much better proxy for costs than weight-based charges. Since 2002, the amount of small aircraft (planes with fewer than 100 seats) flying into New York area airport increased substantially. Small aircraft flights at JFK increased 393%; Newark increased 53%; and LaGuardia increased 48%. The way we charge for airport use is an important contributor to this trend. Economists on both sides of the political aisle have acknowledged this relationship.

We share the view that expanded capacity is a critical component of the long-term solution to relieve congestion and get travelers to their destinations on time and in a humane fashion. We are intensely focused on such solutions, both at the FAA with NextGen and at the Department level. The FAA is hard at work bringing new technology and techniques on-line to unsnarl air traffic delays, and we appreciate the funding Congress has appropriated for these purposes. In recognition of these critical enhancements, the President’s FY 2009 Budget Request would more than double the investment in NextGen technology – providing $688 million for key research and technology to help meet the nation’s rapidly growing demand for air travel, including the transformation from radar-based to satellite-based air traffic systems.

The FAA will begin rolling out several elements of the NextGen system this summer. This rollout will include the national debut of Automatic Dependent Surveillance-Broadcast (ADS-B) technology in Florida. The ADS-B program will change the nation's air traffic control system from one that relies on radar technology to a system that uses precise location data from a global satellite network. The FAA has chosen Miami as the key site for installation and testing of two broadcast services of the ADS-B program - Traffic Information Services – Broadcast (TIS-B) and Flight Information Services – Broadcast (FIS-B). These broadcast services transmit weather and traffic information to the cockpit of properly equipped aircraft. The FAA plans to commission these broadcast services in November 2008 and can then begin nationwide deployment.

Over the next few years, the FAA will also install and test ADS-B for use in Air Traffic Control Separation Services. Philadelphia is one of the key sites for this initiative. The FAA plans to commission the ADS-B services in September 2010 and a nationwide rollout by 2013.

B. Consumer Protection Initiatives

While relieving congestion will go a long way in addressing consumer issues, the Department also is undertaking a number of consumer-specific measures. Our consumer protection initiatives have advanced a great deal in the last six months. This is due in part to the appropriation by Congress of $2.5 million targeted to improving consumer protections, and I can assure you we are putting it to good use. The funding is being used for additional staff to pursue investigations and enforcement actions, improvements to our aviation consumer protection Web site and consumer complaint system, brochures for air travelers to help them understand their rights and responsibilities, and a series of public forums to listen to air travelers and the problems they have experienced.

The Department has initiated three rulemakings to enhance passenger rights and protections. In November 2007, the Department issued a proposal to double the limits on the compensation required to be paid to “bumped” passengers and extend the compensation requirement to smaller aircraft. Just last week Secretary Peters announced final changes to the so called “bumping rule,” which takes effect next month. Under the revised rule, fliers who are involuntarily bumped will receive up to $400 if they are rescheduled to reach their destination within two hours of their original arrival time or four hours for international flights, and up to $800 if they are not rerouted within that timeframe. The new rule also covers more flights, including those operated with aircraft seating 30 people or more; the current rule covers flights with 60 seats or more. The amount of these payments are determined by the price of the ticket and the length of the delay, and are in addition to the value of the passenger’s ticket, which the flyer can use for alternate transportation or have refunded if not used. As the Secretary has noted, it is difficult to compensate for a missed family occasion or business opportunity, but this rule will ensure flyers are more fairly reimbursed for their inconvenience.

The Department also published a proposal to enhance the on-time performance data that carriers currently report to the Department so that the Department, the industry, and the public have access to more complete information on flights that are cancelled, diverted, or experience gate returns. We hope to take final action soon.

The third rulemaking, an Advance Notice of Proposed Rulemaking, requested comments on various proposals designed to provide consumers information or enhance consumer protections, including proposed requirements that airlines: create legally binding contingency plans for extended tarmac delays, respond to all consumer complaints within 30 days, publish complaint data online, and provide on-time performance information for international flights. The Department is currently considering the comments received. The next step would be issuance of a Notice of Proposed Rulemaking seeking comments on any proposals the Department decides to advance after reviewing the public comments.

In addition to these rulemakings, the Secretary formed a "Tarmac Delay Task Force" in December. The purpose of the task force is to study past delays, review existing and other promising practices, and develop model contingency plans that airlines and airports can tailor to their unique operating environments to mitigate the impact of lengthy ground delays on consumers. The task force also will consider possible unintended consequences that solutions to tarmac delays may pose for travelers. The task force is composed of 35 individuals representing a broad cross-section of airlines, airports, consumer groups, and other stakeholders. The first meeting of the task force was held February 26, and the next meeting is scheduled for April 29. The Department expects that the task force will meet at least three more times in 2008 and will complete its work by the end of the year. In my opinion, the Task Force is working well and will be the source of best practices that will improve the travel experience when things do go wrong.

Three other important initiatives of our Aviation Enforcement Office deserve mention. The office has plans to conduct on-site enforcement investigations of five large airlines this fiscal year to evaluate their compliance with consumer protection requirements. In addition, the office will be holding three Aviation Consumer Protection Forums across the country to educate consumers regarding their rights as air travelers and to hear first-hand their concerns about air travel. The office is also continuing its investigation of unrealistic scheduling by large airlines, targeting chronically delayed flights. During the fourth quarter of 2007, the number of such flights decreased dramatically, and in 2008, the Aviation Enforcement Office will be applying a somewhat more rigorous set of criteria during its review.

Some have argued that airlines have individually or collectively scheduled flights during periods of the day in which the system is simply unable to handle the volume without resulting delays. I would like to assure the Committee that the Department of Transportation has sufficient authority to investigate unrealistic scheduling and, if necessary, penalize actions that we deem to be unfair or deceptive trade practices. Although a congested system is not necessarily evidence of unfair or deceptive practices, we will continue to diligently investigate potential evidence of such practices and take any appropriate action.

We are well aware that tarmac and flight delays are making air travel an unpleasant experience for passengers. The Department will continue to take action to ease uncertainty and reduce inconvenience for passengers.

III. Addressing the Problem and Not the Symptom

While we are working to improve consumer protections, we do not want to lose sight of the fact that the underlying cause of much of the occasional misery attributed to air travel is congestion and delays. For this reason, the Department has been engaged in a discussion over the last several months with a wide variety of stakeholders on the efficacy of using a better economic model to balance supply and demand in a sustainable way.

Some have incorrectly suggested that expanding capacity should be the only government response to congestion in New York City and around the country. This view largely ignores the tremendous short-term opportunities to utilize existing capacity efficiently. It also ignores the physical, economic, and political constraints on capacity expansion in many parts of the U.S. aviation system.

The Department looks to increase capacity whenever and wherever possible. Our support for expansion of Philadelphia International Airport and O’Hare International Airport are concrete examples. Philadelphia in particular is proposing major capacity enhancements to accommodate current and future aviation demand in the Philadelphia metropolitan area during all weather conditions. Key features of the proposal consist of major airfield improvements, including construction of one or more new runways and related facilities. Capacity increases must be part of the solution, particularly considering that we expect more than 1 billion air passengers by 2016. However, capacity increases, both physical and operational, often take a long time to implement and may be limited in scope. Sometimes physical capacity cannot be expanded; such as is the case with LaGuardia Airport. Operational improvements can help to address congestion, but sometimes they cannot provide enough capacity to meet demand. For example, in New York, even with the implementation of all the operational improvements initially suggested by the Air Transport Association (ATA) and the Port Authority, congestion was expected to double this year, assuming the FAA took no further action and the airlines moved forward with planned increases in their schedules.

There are additional solutions. Basically, we have a choice between two fundamentally different approaches – administrative remedies and market-based solutions. We believe that outdated government policies relying on administrative remedies have led to an inefficient allocation of the airspace, and that moving towards a market-based system will reduce these inefficiencies and contribute to an improved flying experience for air travelers.

A. Administrative Remedies

Instituting administrative remedies, such as caps, is an effective, but not efficient way to reduce delays. Limiting the number of flights into an airport will reduce congestion at that airport. The Department decided to institute a short-term cap at JFK and Newark airports because something needed to be done to avoid a repeat of the flight delays that we experienced last summer. However, caps are not the best solution for improving travel options for passengers.

Airlines are often enthusiastic in their support of caps at an airport they already serve. When a cap is established, incumbents are protected because they typically maintain their market share and the potential for new competition is diminished. The legacy airlines’ support for such a policy makes sense, because limited competition makes them more profitable and protects them from new entrants that might want to compete by offering lower fares.

Although caps protect existing airline business, they also prevent airlines from adding capacity at an airport unless they are able to obtain a slot from a competitor. As a result, one of the best-known problems with slots is that they encourage airlines to “babysit” slots; i.e., underutilize the slot by flying multiple small aircraft into an airport to maximize the number of slots an airline can occupy at the lowest possible cost.[2] As a result, slots do not always go to those who value them the most and who will use the capacity in the most efficient manner.

This limitation on capacity and competition naturally leads to fare increases at an airport, because it creates a scarce commodity, and passengers pay a premium for that commodity.

A less apparent problem is the perverse incentive that appears when caps are being contemplated at an airport for the first time. In such a situation, incumbents are encouraged to build up flight operations in advance of a capping action, simply to generate a better base for the future allocation of slots. Thus, the talk of a heavy handed and artificial solution to a problem actually exacerbates the congestion problems at the airport. For example, when the FAA began to intervene at Newark Liberty and JFK airports by designating both airports Level 2, Schedule Facilitated, airports under International Air Transport Association guidelines, the schedules that the air carriers proposed for the summer of 2008 reflected growth that appeared to be enhanced by the signals that the FAA intended to address the congestion problem with a cap.

If caps are not the answer, then the question arises – what is the solution?

B. Market-Based Remedies

Alfred Kahn, an airline economist and former Chairman of the Civil Aeronautics Board said, “Whenever competition is feasible, it is, for all its imperfections, superior to regulation as a means of serving the public interest.” Secretary Peters echoed that sentiment when she said, “Our preference is to find a way to let market incentives do the job, and not to return to the days of government-regulated flights and limited competition.” Although the Department instituted caps as a short-term measure, we continue to explore market-based remedies as a longer-term solution to congestion.

Last week, Secretary Peters announced the Department’s proposal for a new way to manage congestion at New York’s LaGuardia Airport in a Supplemental Notice of Proposed Rulemaking (LaGuardia SNPRM).[3] Even though this facility has been capped since 1968, it is still consistently one of the top three most delayed airports in the nation. Under a supplemental rulemaking, the Department is proposing two market-based options that would require a limited number of flights operated by the airlines in a given day, known as slots, to be made available through an auction process.

Under the first option, all air carriers would be given up to 20 slots a day for the 10 year life of the rule. Meanwhile, over the next five years, 8 percent of the additional slots currently used by an airline would be made available to any carrier via an auction. An additional 2 percent of the slots would be retired to help cut the record delays at the airport. Proceeds from the auction would be invested in new congestion reduction and capacity improvement initiatives in the New York region.

The second option also gives airlines permanent access to up to 20 slots a day for a 10 year period. Beyond those flights, 20 percent of the slots currently used by the airlines would be made available over the next five years to all other airlines through an auction. Under this option, the carriers would retain the net proceeds of their auctioned slots.

Both options provide financial stability to the airlines operating at LaGuardia by providing them with a defined right to operate at the airport for a decade, something they do not have today. These rights are given in recognition of the significant financial investment the airlines have made in the airport’s infrastructure.

This plan strikes a sound balance between protecting investments by incumbent carriers and ensuring that all airlines have the ability to fly to New York’s LaGuardia. While the status quo at LaGuardia has led to stagnant service, delays, and unnecessarily high fares, open access and competition will help give flyers more choices, fewer delays, and lower fares.

It is clear that the current system does not allocate airspace capacity efficiently. Solving that problem, however, should not entail government picking "winners and losers," particularly when, as currently structured, everyone involved in air travel feels like they are the loser—both those getting terrible service and those getting blamed for providing terrible service.

Market-based pricing has been demonstrated time and again as the most effective way to allocate a scarce resource that is in high demand. Space in a movie theater, use of cell phone infrastructure, or flights during certain times to certain destinations are all examples that illustrate that such pricing works. Pricing can balance demand with available capacity, resulting in less congestion and more reliable schedules. Also, pricing sends better signals as to where the system needs extra capacity, and it can supply the revenues to add such needed capacity. Increases in fares under a pricing regime would be an indicator that more capacity is needed. In terms of efficiency, the current system focuses on airplane throughput. Instead, the objective of airspace and airport management policies should be passenger throughput. Proper pricing can increase the number of passengers served at an airport, even if the number of planes does not increase. And a framework to establish proper price signals need not be disruptive to the operations of airports.

Changing from the traditional, increasingly inefficient administrative controls to a market-based system has generated a fair amount of concern, primarily from the airlines. The following discussion outlines the issues related to pricing that were considered by the ARC. It details concerns expressed about pricing and how those concerns can be addressed.

Track Record in Aviation – Some opponents to market-based pricing believe it does not have a proven track record in aviation, and that implementation of such pricing for airspace will devastate the industry. Further, they do not believe that experience with such pricing in other industries provides a meaningful parallel for application in the airline industry.

We live in a market economy which allocates scarce resources through pricing. This model has been adopted because history has demonstrated repeatedly that markets are the most efficient means of allocating a scarce commodity. While the aviation industry is unique in a number of respects, there is no reason to believe that market-based methods will fail if applied to this industry.

In fact, market-based pricing has been used effectively in the United States for aviation. Boston’s Logan International Airport applied a pricing plan in 1988 that dramatically reduced congestion at that airport. While the plan was later found to be out of proportion to the need to reduce congestion, because it operated during non-congested as well as congested periods market-based pricing at Logan Airport did reduce congestion. In addition, the Port Authority of New York and New Jersey applied pricing in 1968 to control congestion. The pricing worked initially; however, the fee was not increased with time and eventually became ineffective.

Those questioning the efficacy of market-based pricing in aviation need look no further than airline pricing policies. Airlines already apply a market-based pricing model to airline travel. When searching for low fare flights to your destination, inevitably the cheapest flights to be found are those departing or arriving at the least desirable times. By pricing flights at less attractive times at a lower level than flights at popular travel times, airlines are incentivizing consumers to move to a less congested flight. However, this congestion fee does not reduce overall congestion in the system, because it does not impact the way the airlines themselves are charged for air traffic control and airport services.

Cost to Consumers – Arguments have been made that market-based pricing could increase the monetary cost to travelers, if airlines pass congestion fees on to consumers. This argument, however, ignores two facts: (1) limiting competition by capping an airport creates significant upward pressure on fares and (2) congestion fees will be offset by congestion savings.

The increased cost of a congestion charge is likely to be more than offset by the downward pressure on fares brought about by additional competition. Statistics show that when a low cost carrier enters a new market, the additional competition results in a fare decrease. When Southwest entered the market in Philadelphia in May 2004, the result was an immediate fare decrease of 24%. Three years later, in the 4^th quarter of 2007, the average air fare in Philadelphia was still down 12% from the 4^th quarter of 2003, before Southwest entered the market. While it is still unclear how much airlines will pay in an auction for slots at LaGuardia, it is likely that competition from new entrants will result in greater fare savings, which will offset any increases as a result of the purchasing slots.

Similarly, we need to explore the costs of instituting market mechanisms compared to the costs of various alternatives (including capping access to an airport or allowing substantial increases in delays).

In fact, congestion is expensive. According to the ATA, congestion costs the economy over $12.5 billion a year. The New York City Comptroller has estimated that congestion costs travelers to New York City an additional $187 million. Reducing congestion will produce increased system reliability and dramatic savings for consumers. Market-based pricing would decrease congestion and thereby decrease the costs that flow from congestion.

Market-based pricing makes the costs consumers already pay for flying into a congested market transparent and gives them the ability to avoid the higher costs by traveling during less congested periods. When scarcity exists, consumers pay higher costs. In the case of aviation, those costs are paid in terms of wait times or higher fares due to slot controls or pricing. Only with market-based pricing do consumers have the choice of avoiding higher prices. Some airlines now charge more for additional leg room. If passengers will pay for additional leg room, they almost certainly will pay to arrive on time.

Government Tax – One of the principal points argued by those opposed to market-based mechanisms is that the organizations that control airport and airspace access are both monopolies and, therefore, are themselves not market-based. For this reason, pricing of airport or airspace access would operate as a government tax, rather than a market price between two private entities.

The details of how the proceeds of a pricing mechanism might be spent are important and if the proceeds are dedicated to expanding capacity and funding specific projects at the airports, then the revenue would be directly used to alleviate the congestion that generated the proceeds and would not be a tax. In recognition of this concern, under first option proposed in the LaGuardia SNPRM, the FAA would spend any proceeds from an auction on congestion and delay management initiatives in the New York City area, after recouping the costs of the auction. Under the second proposed option, the airlines would retain the proceeds of the auction.

Relationship Between Physical Assets and Investments – Many airlines have invested hundreds of millions, and even billions, of dollars in terminals, gates, hangars, and other facilities at airports. Those airlines using special revenue facility bond financing gain tax preferences due to the public nature of the facilities whose financings they underwrite. They give up the facility to the airport proprietor at a predetermined date. The airlines also realize that the airport proprietor ultimately controls the use of the facilities for the benefit of the public. Nonetheless, those airlines are concerned that they would lose the ability to realize a return on those investments, if a pricing program resulted in the airlines not being able to fly their traditional schedule. Conversely, if reallocation of slots is achieved through imposition of a market-based pricing mechanism that does not recognize historic rights, some are concerned that the new owners of slots would not be able to gain access to the gates and ticket counters controlled by the former owners of the slots.

Any pricing mechanism pursued by the Department will recognize these concerns. Since the advent of the competition plan requirement in AIR-21, the Department has been educating airport proprietors about their responsibilities to accommodate all requesting carriers on a reasonable basis. Airlines are aware that their unused gate leaseholds may be accessed by other carriers, due to the unavailability of common-use gates and if the need arises. In addition, the Department would manage any market-based system in such a way as to recognize the legitimate interests of those airlines, which have made significant investments in existing infrastructure, to realize an adequate return on those investments. The Department does not want to create a disincentive for future airline investment in aviation infrastructure.

We recognize the concern about disruptions to the industry in the LGA SNPRM. The proposals would grant 10-year leases to airlines currently serving LaGuardia for at least 20 of their current slots. Such an approach recognizes the historical investment by airlines at the airport and the community, and will avoid disruption to the national air transportation system.

Additionally, the Airport Council International, North America, expressed concerns that the Department’s LaGuardia SNPRM might interfere with the airport’s ability to manage its own facilities. The Department has consistently worked with airports to give them additional tools to manage their airports and reduce delays – such as through our rates and charges policies – and we will continue to work to develop better delay and congestion management tools that do not overstep our regulatory authority to manage the airspace and respect the airports need to manage its own facilities. The Port Authority has failed to use this tool and not managed congestion at LaGuardia for 40 years.

Reduced Demand for Air Travel – Some civic leaders were particularly concerned about the impact market-based pricing might have on the affordability of traveling to the New York City. As noted above, however, consumers are paying a heavy price in terms of congestion. It is unlikely that slightly higher prices during peak periods would serve as a greater deterrent than the chronic delays New York City currently experiences. In fact, a USA Today article published last year noted that savvy travelers avoid New York City whenever possible. That can change if market-pricing can play an appropriate role.

Additionally, by establishing a market mechanism whereby slots will be allocated to the most efficient user, the incentive will be for the slots to go to the airline with the most efficient use of the slot – which will likely be the airline that is able to bring the most passengers in on a plane. This should result in increased passenger throughput at an airport – even as the physical number of planes coming through the airport remains steady – and result in greater availability of seats and downward pressure on ticket prices.

Economic Disruption – Given the sharp increase in fuel prices, airlines are understandably concerned about any additional financial burden generated by pricing. In addition, the airports have billions of dollars of debt and other financing tied to the financial health of the airlines. The Department understands the financial environment in which airlines and airports are operating. Any market-based solution will need to be implemented in a manner that does not unduly disrupt the current system.

The recent LaGuardia SNPRM will result in a very small number of flights being auctioned off annually – under options 1 and 2, fourteen or thirty-six slots out of 1168 slots, respectively, will be auctioned annually for the first five years of the rule, with no required auctions for the last five years of the rule. This is a very small number of slots that will be auctioned – and while some will claim that any disruption is problematic, we expect that numerous experts and economists will chide the Department for having auctioned what they view as too small of an amount. This SNPRM is attempting to strike a balance between competing views and to spur a secondary, voluntary market whereby airlines can freely trade slots and excess capacity to the highest bidder able to realize the best economic use of the slot.

Impact on Small Communities and General Aviation – There are concerns that market-based pricing would limit general aviation access to airports and would make it difficult for carriers to continue adequately serving small communities. While market-based pricing does an excellent job of allocating resources to those who can realize the most economic value from that resource, such pricing does not allow for the societal value placed on certain activities. The Department will monitor whether modifications to market-based mechanisms are necessary to provide for continued service to small communities and continued access for general aviation. If the Department were to publish a final rule that would auction slots at LaGuardia, the Department will carefully analyze and consider the impacts an auction will have on service to small communities.

IV. Conclusion

Our objective is to address the fundamentals of the problem of aviation congestion and achieve solutions that are long-term and that provide maximum benefits to the traveling public and the vital industry that serves them. The basic question for us is whether to continue to apply temporary band-aids to the problem, or whether to seek solutions that will do a better job of allocating our scarce airspace. We believe that we must take positive, immediate steps to deal with a dynamic air transportation system that has far outpaced earlier efforts at improvement. Air travelers deserve to fly the safest and most reliable air system possible. The time has come to bring aviation into the 21^st century and more fully allow market forces to work.

Change is difficult, and the airlines’ concerns are understandable. In fact, very similar arguments were made by the airlines in opposition to deregulation. Concerns were raised about disruption to the industry, lack of a track record, and disruption to business models. However, the ATA Airline Handbook includes a long list of benefits that resulted from deregulation. The Handbook notes that deregulation stimulated competition, led to rapid growth in air travel, and reduced fares by more than 50% in real terms. We believe that market-based remedies directed at congestion will improve airline service like deregulation did.

Thank you again for this opportunity to testify. I will be pleased to answer any questions you may have.

Statement of

The Honorable D.J. Gribbin
General Counsel,
U.S. Department of Transportation

Before the

U.S. House of Representatives
Committee on Transportation and Infrastructure
Subcommittee on Aviation

Concerning

Airline Delays and Consumer Issues

April 9, 2008

Mr. Chairman and Members of the Committee, thank you for the opportunity to testify today. Allow me to use this time to update you on the initiatives taken by the Office of the Secretary and the Federal Aviation Administration (FAA) to address the issues of airline delays and consumer protection.

The Administration identified the need to respond to the growing consumer impacts of aviation system delays over a year ago. Since then, we have taken a series of important steps, including the President’s announcements related to holiday travel. At the direction of Secretary Peters, our Department has developed a comprehensive list of initiatives designed to improve air travel and reduce the impacts of lengthy delays on consumers. While we have maintained a strong focus on short term actions, it is imperative that we not lose sight of the ultimate objective: establishing a sustainable and economically efficient aviation policy that actually reduces delays, not simply treats the symptoms. In order to accomplish this objective, it is important that we reform our economic model for air traffic control services and airport pricing similar to what the Administration proposed last year. Without changes of this magnitude and regardless of regulatory actions pursued, it is inevitable that millions of Americans will experience unreliable air travel options and growing dissatisfaction with the performance of the U.S aviation system.

I. The Problem

We are all too familiar with the litany of statistics that demonstrate without question that action is needed on behalf of air travelers and the aviation sector of the national economy. One of the most compelling statistics is that last year almost 2 million flights operated by large air carriers did not land on time because they were delayed, cancelled, or diverted. That is almost 27 percent of the operations reported by these carriers. Imagine any other business telling its customers that 27 percent of the time the service they paid for is not available as advertised. The Administration has made commitments at the highest levels to address this problem. When Secretary Peters met with President Bush last September, he said, “We’ve got a problem, we understand there’s a problem, and we’re going to address the problem.”

I think we all agree that the air traveler deserves a better approach. Last year, according to the American Customer Satisfaction Index, the satisfaction level with the airline industry overall fell to its lowest level in 7 years. The statistics we gather monthly at DOT confirm deteriorating service levels. In 2007, there was a sharp rise in the number of complaints received by the Department – 13,168 complaints, which is over 58% more than the 8,325 complaints received in 2006. Complaints are continuing at a high rate in 2008 – the Department received 3,152 complaints during the first quarter of this year. For us, the objective is not to parcel out the blame, but to get to the root of the problem – congestion. Consumer satisfaction would be vastly improved if flights simply arrived on schedule. The growing lack of reliability in air travel these days is one of the most significant impacts of congestion.

II. DOT Actions

The Department began to address flight delays and related consumer issues over a year ago. In February 2007, the Administration sent Congress a comprehensive plan for transforming our aviation system to meet our present and future needs. A central reform of the Administration’s proposal was the overhaul of the FAA’s financing structure to replace the decades old system of collecting ticket taxes with a stable, cost-based funding stream and to facilitate equipping our aviation system with modern Next Generation Air Transportation System (NextGen) technology. The proposal creates a stronger correlation between what users pay and what it costs the FAA to provide them with air traffic control services; thus, providing price incentives for systems users to reduce delays.

Flight delay problems – including cancellations and missed connections – are the number one air traveler complaint. That is why addressing aviation congestion is a critical component to improving consumer satisfaction with the aviation industry. The year 2007 was the second worst year for delays since 1995, and the first two months of 2008, while slightly better, are the third worst for flight delays during that time of year. Since one-third of the air traffic moves through New York airspace, the three airports in the New York City metropolitan area had the highest percentage of delayed flights last summer, and delays in New York cascade throughout the system, the Department chose to focus its initial efforts in the New York area.

Given the record delays last summer, in July 2007, Secretary Peters formed an internal New York Air Congestion Working Group and tasked them with developing an action plan to reduce congestion and delays at airports in the New York City region and improve customer satisfaction. The working group developed a plan, which included establishing a New York Aviation Rulemaking Committee (ARC), holding scheduling reduction meetings, implementing operational improvements, and enhancing customer satisfaction. Since the hearing before this Subcommittee last September, the Department has taken a number of actions to implement the working group’s recommendations.

A. Aviation Congestion Mitigation Efforts

Last September, Secretary Peters formed a New York Aviation Rulemaking Committee (ARC), which was composed of representatives from passenger and cargo airlines operating out LaGuardia, John F. Kennedy International (JFK), Newark Liberty International (Newark), and Teterboro Airports, airline and airport trade associations, the Port Authority of New York and New Jersey (Port Authority), passenger rights advocates, and representatives from FAA and DOT. The ARC had the monumental task of researching and vetting the options for reducing congestion in New York’s major airports over the course of merely three months. The Administration wanted to have a robust discussion and input from all interested parties before moving forward with a policy action.

Incorporating the information received from the ARC, the Department is undertaking several actions to address aviation congestion in New York.[1] These actions include:

• Caps on hourly operations at JFK;
• Proposed caps on hourly operations at Newark;
• Completion of 8 of the 17 airport and airspace recommended operational improvements identified by the Air Transport Association (ATA) and the Port Authority of New York and New Jersey. We expect to complete the remaining 9 recommended improvements by summer 2008;
• Establishing an executive-level Director position at the FAA to head the New York Area Program Integration Office;
• Further implementation of airspace redesign; and
• Proposed amendments to the Airport Rates and Charges Policy.

During the holiday season, the Department also instituted other measures to mitigate flight delays, such as negotiating an agreement with the Department of Defense to open military airspace for commercial use. We are also continuing our outreach efforts with various stakeholders, including consumer groups, airports, and airline CEOs.

Straight caps without some mechanism to ensure an efficient allocation of scarce slot resources is not economically efficient and, therefore, not our preferred option. Given the urgent need for action, however, it was necessary at the New York City area airports. The Port Authority elected not to pursue various delay reduction approaches, and the President and Secretary Peters would not tolerate delays like those that occurred last summer. The caps at JFK took effect on March 30, and we expect to issue a final order for Newark soon (the comment period on the notice proposing caps at Newark closed on April 1). The caps at JFK (and Newark, if imposed,) are scheduled to expire on October 24, 2009.

We still believe that there is a need for market-based measures to allocate capacity, and the Department continues to explore such measures. For example, there are options available to airports in lieu of caps. Our preference is to see airports address their challenges locally; however, the Federal Government will be involved once a congested airport impacts the rest of the national airspace. New York air congestion causes delays throughout the U.S.

In January, we issued a notice that proposed providing airports with a new and useful tool to price access to their facilities better. The FAA proposal would make three changes to the airports rates and charges policy. The first change would clarify that airports may use a two-part fee structure with an operation-based and weight-based element. The second change would permit an operator of a congested airport to charge for work under construction. Finally, the third change would expand the authority of an operator of an airport system to charge users of the congested airport in the system for the airfield costs of other airports in its system. If adopted, the amendments would allow a congested airport to charge prices commensurate with the true costs of using its runways. In return, this will provide users better incentives to consider alternatives, such as scheduling flights outside of peak demand times, increasing aircraft size to use the congested runways more efficiently or meeting regional air service needs through alternative, less congested facilities. The comment period ended on April 3, and we hope to act on the proposal soon.

Per landing charges are a much better proxy for costs than weight-based charges. Since 2002, the amount of small aircraft (planes with fewer than 100 seats) flying into New York area airport increased substantially. Small aircraft flights at JFK increased 393%; Newark increased 53%; and LaGuardia increased 48%. The way we charge for airport use is an important contributor to this trend. Economists on both sides of the political aisle have acknowledged this relationship.

We share the view that expanded capacity is a critical component of the long-term solution to relieve congestion and get travelers to their destinations on time and in a humane fashion. We are intensely focused on such solutions, both at the FAA with NextGen and at the Department level. The FAA is hard at work bringing new technology and techniques on-line to unsnarl air traffic delays, and we appreciate the funding Congress has appropriated for these purposes. In recognition of these critical enhancements, the President’s FY 2009 Budget Request would more than double the investment in NextGen technology – providing $688 million for key research and technology to help meet the nation’s rapidly growing demand for air travel, including the transformation from radar-based to satellite-based air traffic systems .

The FAA will begin rolling out several elements of the NextGen system this summer. This rollout will include the national debut of Automatic Dependent Surveillance-Broadcast (ADS-B) technology in Florida. The ADS-B program will change the nation's air traffic control system from one that relies on radar technology to a system that uses precise location data from a global satellite network. The FAA has chosen Miami as the key site for installation and testing of two broadcast services of the ADS-B program - Traffic Information Services – Broadcast (TIS-B) and Flight Information Services – Broadcast (FIS-B). These broadcast services transmit weather and traffic information to the cockpit of properly equipped aircraft. The FAA plans to commission these broadcast services in November 2008 and can then begin nationwide deployment.

Over the next few years, the FAA will also install and test ADS-B for use in Air Traffic Control Separation Services. The key sites for this initiative are Louisville, Philadelphia, the Gulf of Mexico, and Juneau. The FAA plans to commission the ADS-B services in September 2010 and a nationwide rollout by 2013.

B. Consumer Protection Initiatives

While relieving congestion will go a long way in addressing consumer issues, the Department also is undertaking a number of consumer-specific measures. Our consumer protection initiatives have advanced a great deal since your September 2007 hearing. This is due in part to the appropriation by Congress of $2.5 million targeted to improving consumer protections, and I can assure you we are putting it to good use. The funding is being used for additional staff to pursue investigations and enforcement actions, improvements to our aviation consumer protection Web site and consumer complaint system, brochures for air travelers to help them understand their rights and responsibilities, and a series of public forums to listen to air travelers and the problems they have experienced.

The Department has initiated three rulemakings to enhance passenger rights and protections. In November 2007, the Department issued a proposal to double the limits on the compensation required to be paid to “bumped” passengers and extend the compensation requirement to smaller aircraft (i.e., aircraft with as few as 30 seats, versus 60 seats in the existing rule). The Department is currently considering the comments received and expects to take final action on this proposal soon.

The Department also published a proposal to enhance the on-time performance data that carriers currently report to the Department so that the Department, the industry, and the public have access to more complete information on flights that are cancelled, diverted, or experience gate returns. We hope to take final action soon.

The third rulemaking, an Advance Notice of Proposed Rulemaking, requested comments on various proposals designed to provide consumers information or enhance consumer protections, including proposed requirements that airlines: create legally binding contingency plans for extended tarmac delays, respond to all consumer complaints within 30 days, publish complaint data online, and provide on-time performance information for international flights. The Department is currently considering the comments received. The next step would be issuance of a Notice of Proposed Rulemaking seeking comments on any proposals the Department decides to advance after reviewing the public comments.

In addition to these rulemakings, the Secretary formed a "Tarmac Delay Task Force" in December. The purpose of the task force is to study past delays, review existing and other promising practices, and develop model contingency plans that airlines and airports can tailor to their unique operating environments to mitigate the impact of lengthy ground delays on consumers. The task force also will consider possible unintended consequences that solutions to tarmac delays may pose for travelers. The task force is composed of 35 individuals representing a broad cross-section of airlines, airports, consumer groups, and other stakeholders. The first meeting of the task force was held February 26, and the next meeting is scheduled for April 29. The Department expects that the task force will meet at least three more times in 2008 and will complete its work by the end of the year. In my opinion, the Task Force is working well and will be the source of best practices that will improve the travel experience when things do go wrong.

Three other important initiatives of our Aviation Enforcement Office deserve mention. The office has plans to conduct on-site enforcement investigations of five large airlines this fiscal year to evaluate their compliance with consumer protection requirements. In addition, the office will be holding three Aviation Consumer Protection Forums across the country to educate consumers regarding their rights as air travelers and to hear first-hand their concerns about air travel. The office is also continuing its investigation of unrealistic scheduling by large airlines, targeting chronically delayed flights. During the fourth quarter of 2007, the number of such flights decreased dramatically, and in 2008, the Aviation Enforcement Office will be applying a somewhat more rigorous set of criteria during its review.

We are well aware that tarmac and flight delays are making air travel an unpleasant experience for passengers. The Department will continue to take action to ease uncertainty and reduce inconvenience for passengers.

III. Addressing the Problem and Not the Symptom

While we are working to improve consumer protections, we do not want to lose sight of the fact that the underlying cause of much of the occasional misery attributed to air travel is congestion and delays. For this reason, the Department has been engaged in a discussion over the last several months with a wide variety of stakeholders on the efficacy of using a better economic model to balance supply and demand in a sustainable way.

Some have incorrectly suggested that expanding capacity should be the only government response to congestion in New York City and around the country. This view largely ignores the tremendous short-term opportunities to utilize existing capacity efficiently. It also ignores the physical, economic, and political constraints on capacity expansion in many parts of the U.S. aviation system.

The Department looks to increase capacity whenever and wherever possible. Our support for expansion of O’Hare International Airport is one concrete example. Capacity increases must be part of the solution, particularly considering that we expect more than 1 billion air passengers by 2016. However, capacity increases, both physical and operational, often take a long time to implement and may be limited in scope. Sometimes physical capacity cannot be expanded; such as is the case with LaGuardia Airport. Operational improvements can help to address congestion, but sometimes they cannot provide enough capacity to meet demand. For example, in New York, even with the implementation of all the operational improvements initially suggested by the Air Transport Association (ATA) and the Port Authority, congestion was expected to double this year, assuming the FAA took no further action and the airlines moved forward with planned increases in their schedules.                              

There are additional solutions. Basically, we have a choice between two fundamentally different approaches – administrative remedies and market-based solutions. We believe that outdated government policies relying on administrative remedies have led to an inefficient allocation of the airspace, and that moving towards a market-based system will reduce these inefficiencies and contribute to an improved flying experience for air travelers.

A. Administrative Remedies

Instituting administrative remedies, such as caps, is an effective, but not efficient way to reduce delays. Limiting the number of flights into an airport will reduce congestion at that airport. The Department decided to institute a short-term cap at JFK and Newark airports because something needed to be done to avoid a repeat of the flight delays that we experienced last summer. However, caps are not the best solution for improving travel options for passengers

Airlines are often enthusiastic in their support of caps at an airport they already serve. When a cap is established, incumbents are protected because they typically maintain their market share and the potential for new competition is diminished. The legacy airlines’ support for such a policy makes sense, because limited competition makes them more profitable and protects them from new entrants that might want to compete by offering lower fares

Although caps protect existing airline business, they also prevent airlines from adding capacity at an airport unless they are able to obtain a slot from a competitor. As a result, one of the best-known problems with slots is that they encourage airlines to “babysit” slots; i.e., underutilize the slot by flying multiple small aircraft into an airport to maximize the number of slots an airline can occupy at the lowest possible cost.[2] As a result, slots do not always go to those who value them the most and who will use the capacity in the most efficient manner.

This limitation on capacity and competition naturally leads to fare increases at an airport, because it creates a scarce commodity, and passengers pay a premium for that commodity.

A less apparent problem is the perverse incentive that appears when caps are being contemplated at an airport for the first time. In such a situation, incumbents are encouraged to build up flight operations in advance of a capping action, simply to generate a better base for the future allocation of slots. Thus, the talk of a heavy handed and artificial solution to a problem actually exacerbates the congestion problems at the airport. For example, when the FAA began to intervene at Newark Liberty and JFK airports by designating both airports Level 2, Schedule Facilitated, airports under International Air Transport Association guidelines, the schedules that the air carriers proposed for the summer of 2008 reflected growth that appeared to be enhanced by the signals that the FAA intended to address the congestion problem with a cap.

If caps are not the answer, then the question arises – what is the solution?

B. Market-Based Remedies

Alfred Kahn, an airline economist and former Chairman of the Civil Aeronautics Board said, “Whenever competition is feasible, it is, for all its imperfections, superior to regulation as a means of serving the public interest.” Secretary Peters echoed that sentiment when she said, “Our preference is to find a way to let market incentives do the job, and not to return to the days of government-regulated flights and limited competition.” Although the Department instituted caps as a short-term measure, we continue to explore market-based remedies as a longer-term solution to congestion.

It is clear that the current system does not allocate airspace capacity efficiently. Solving that problem, however, should not entail government picking "winners and losers," particularly when, as currently structured, everyone involved in air travel feels like they are the loser—both those getting terrible service and those getting blamed for providing terrible service.

Market-based pricing has been demonstrated time and again as the most effective way to allocate a scarce resource that is in high demand. Space in a movie theater, use of cell phone infrastructure, or flights during certain times to certain destinations are all examples that illustrate that such pricing works. Pricing can balance demand with available capacity, resulting in less congestion and more reliable schedules. Also, pricing sends better signals as to where the system needs extra capacity, and it can supply the revenues to add such needed capacity. Increases in fares under a pricing regime would be an indicator that more capacity is needed. In terms of efficiency, the current system focuses on airplane throughput. Instead, the objective of airspace and airport management policies should be passenger throughput. Proper pricing can increase the number of passengers served at an airport, even if the number of planes does not increase. And a framework to establish proper price signals need not be disruptive to the operations of airports.

Changing from the traditional, increasingly inefficient administrative controls to a market-based system has generated a fair amount of concern, primarily from the airlines. The following discussion outlines the issues related to pricing that were considered by the ARC. It details concerns expressed about pricing and how those concerns can be addressed.

Track Record in Aviation – Some opponents to market-based pricing believe it does not have a proven track record in aviation, and that implementation of such pricing for airspace will devastate the industry. Further, they do not believe that experience with such pricing in other industries provides a meaningful parallel for application in the airline industry.

We live in a market economy which allocates scarce resources through pricing. This model has been adopted because history has demonstrated repeatedly that markets are the most efficient means of allocating a scarce commodity. While the aviation industry is unique in a number of respects, there is no reason to believe that market-based methods will fail if applied to this industry.

In fact, market-based pricing has been used effectively in the United States for aviation. Boston’s Logan International Airport applied a pricing plan in 1988 that dramatically reduced congestion at that airport. While the plan was later found to be out of compliance with the then-existing Federal rules, market-based pricing at Logan Airport did reduce congestion. In addition, the Port Authority of New York and New Jersey applied pricing in 1968 to control congestion. The pricing worked initially; however, the fee was not increased with time and eventually became ineffective.

Those questioning the efficacy of market-based pricing in aviation need look no further than airline pricing policies. Airlines already apply a market-based pricing model to airline travel. When searching for low fare flights to your destination, inevitably the cheapest flights to be found are those departing or arriving at the least desirable times. By pricing flights at less attractive times at a lower level than flights at popular travel times, airlines are incentivizing consumers to move to a less congested flight. However, this congestion fee does not reduce overall congestion in the system, because it does not impact the way the airlines themselves are charged for air traffic control and airport services.

Cost to Consumers – Arguments have been made that market-based pricing could increase the monetary cost to travelers, if airlines pass congestion fees on to consumers. The relevant question is not what are the costs of instituting market mechanisms, but rather, what are the costs of instituting market mechanisms compared to the costs of various alternatives (including capping access to an airport or allowing substantial increases in delays).

In fact, congestion is expensive. According to the ATA, congestion costs the economy over $12.5 billion a year. The New York City Comptroller has estimated that congestion costs travelers to New York City an additional $187 million. Reducing congestion will produce increased system reliability and dramatic savings for consumers. Market-based pricing would decrease congestion and thereby decrease the costs that flow from congestion.

Market-based pricing makes the costs consumers already pay for flying into a congested market transparent and gives them the ability to avoid the higher costs by traveling during less congested periods. When scarcity exists, consumers pay higher costs. In the case of aviation, those costs are paid in terms of wait times or higher fares due to slot controls or pricing. Only with market-based pricing do consumers have the choice of avoiding higher prices. Some airlines now charge more for additional leg room. If passengers will pay for additional leg room, they almost certainly will pay to arrive on time.

Government Tax – One of the principal points argued by those opposed to market-based mechanisms is that the organizations that control airport and airspace access are both monopolies and, therefore, are themselves not market-based. For this reason, pricing of airport or airspace access would operate as a government tax, rather than a market price between two private entities.

The details of how the proceeds of a pricing mechanism might be spent are important and if the proceeds are dedicated to expanding capacity and funding specific projects at the airports, then the revenue would be directly used to alleviate the congestion that generated the proceeds and would not be a tax.

International Considerations – Carriers have expressed concerns that market-based pricing will not work at international airports for two reasons: (1) international flights have to leave at certain times to meet connecting flights overseas; and (2) our bilateral and multilateral aviation agreements limit the types of charges that may be collected from foreign carriers.

Carriers have opined that market-based pricing will not work for international flights, because the European airports’ slots rules and the North Atlantic Air Traffic Control track system require them to leave within narrow windows. Thus, they cannot just reschedule these flights to other times. They argue that market-based pricing may not affect decisions for some international destinations, because there is no flexibility in those schedules. This is also true for important domestic spokes like New York, where even a slight shift in schedules can cause misconnection in hundreds of city pairs to/from New York, both domestically and internationally. However, the need for reliable departure times argues for market-based pricing. Currently, flights are delayed from departing because there is no disincentive for non-international flights to depart during this critical period. An appropriate pricing program would provide international carriers with increased assurance that their flights would be allowed to depart on time.

Some have expressed concern that market-based pricing would likely violate U.S. bilateral and multilateral aviation agreements, because such charges may not be considered to be cost-based. Any pricing plan pursued by the Department will comply with our international obligations and will not competitively disadvantage domestic carriers.

Relationship Between Physical Assets and Investments – Many airlines have invested hundreds of millions, and even billions, of dollars in terminals, gates, hangars, and other facilities at airports. Those airlines using special revenue facility bond financing gain tax preferences due to the public nature of the facilities whose financings they underwrite. They give up the facility to the airport proprietor at a predetermined date. The airlines also realize that the airport proprietor ultimately controls the use of the facilities for the benefit of the public. Nonetheless, those airlines are concerned that they would lose the ability to realize a return on those investments, if a pricing program resulted in the airlines not being able to fly their traditional schedule. Conversely, if reallocation of slots is achieved through imposition of a market-based pricing mechanism that does not recognize historic rights, some are concerned that the new owners of slots would not be able to gain access to the gates and ticket counters controlled by the former owners of the slots.

Any pricing mechanism pursued by the Department will recognize these concerns. Since the advent of the competition plan requirement in AIR-21, the Department has been educating airport proprietors about their responsibilities to accommodate all requesting carriers on a reasonable basis. Airlines are aware that their unused gate leaseholds may be accessed by other carriers, due to the unavailability of common-use gates and if the need arises. In addition, the Department would manage any market-based system in such a way as to recognize the legitimate interests of those airlines, which have made significant investments in existing infrastructure, to realize an adequate return on those investments. The Department does not want to create a disincentive for future airline investment in aviation infrastructure.

Reduced Demand for Air Travel – Some civic leaders were particularly concerned about the impact market-based pricing might have on the affordability of traveling to the New York City. As noted above, however, consumers are paying a heavy price in terms of congestion. It is unlikely that slightly higher prices during peak periods would serve as a greater deterrent than the chronic delays New York City currently experiences. In fact, a USA Today article published last year noted that savvy travelers avoid New York City whenever possible. That can change if market-pricing can play an appropriate role.

Economic Disruption – Given the sharp increase in fuel prices, airlines are understandably concerned about any additional financial burden generated by pricing. In addition, the airports have billions of dollars of debt and other financing tied to the financial health of the airlines. The Department understands the financial environment in which airlines and airports are operating. Any market-based solution will need to be implemented in a manner that does not unduly disrupt the current system.

Impact on Small Communities and General Aviation – There are concerns that market-based pricing would limit general aviation access to airports and would make it difficult for carriers to continue adequately serving small communities. While market-based pricing does an excellent job of allocating resources to those who can realize the most economic value from that resource, such pricing does not allow for the societal value placed on certain activities. The Department will monitor whether modifications to market-based mechanisms are necessary to provide for continued service to small communities and continued access.

IV. Conclusion

Our objective is to address the fundamentals of the problem of aviation congestion and achieve solutions that are long-term and that provide maximum benefits to the traveling public and the vital industry that serves them. The basic question for us is whether to continue to apply temporary band-aids to the problem, or whether to seek solutions that will do a better job of allocating our scarce airspace. We believe that we must take positive, immediate steps to deal with a dynamic air transportation system that has far outpaced earlier efforts at improvement. Air travelers deserve to fly the safest and most reliable air system possible. The time has come to bring aviation into the 21^st century and more fully allow market forces to work.

Change is difficult, and the airlines’ concerns are understandable. In fact, very similar arguments were made by the airlines in opposition to deregulation. Concerns were raised about disruption to the industry, lack of a track record, and disruption to business models. However, the ATA Airline Handbook includes a long list of benefits that resulted from deregulation. The Handbook notes that deregulation stimulated competition, led to rapid growth in air travel, and reduced fares by more than 50% in real terms. We believe that market-based remedies directed at congestion will improve airline service like deregulation did.

Thank you again for this opportunity to testify. I will be pleased to answer any questions you may have.

Statement of

The Honorable Tyler Duvall
Acting Under Secretary for Policy
U.S. Department of Transportation

before the

Select Committee on Energy Independence and Global Warming
U.S. House of Representatives

Hearing on

Improving Automobile Fuel Economy

June 26, 2008

Mr. Chairman, I am Tyler Duvall, Acting Under Secretary for Policy for the Department of Transportation.  I appreciate the opportunity to appear before the Committee to discuss our most recent proposal for substantial increases in the fuel economy standards.  These increases are needed more than ever to achieve energy independence and security and reduce carbon dioxide emissions. 

            The demand for petroleum is steadily increasing around the world and here in the U.S.  Altogether, the U.S. consumes about 25 percent of the total amount of petroleum consumed worldwide.  Much of that petroleum goes to providing us the mobility on which our economy depends.  Sixty percent of the petroleum needed to meet that demand is imported.            

            The U.S. produces an estimated 23 percent of the world’s greenhouse gas (GHG) emissions.  Carbon dioxide is the predominant GHG emitted by human sources.  As EPA has said, carbon dioxide is responsible for about 95 percent of transportation GHG emissions, with all of the other emissions combined accounting for the remaining 5 percent of GHG emissions.  The transportation sector is the largest and fastest growing source of domestic carbon dioxide emissions, producing approximately 30 percent of the nation’s total. 

            The problems posed by light vehicle fuel consumption and carbon dioxide emissions have a common solution.  Carbon dioxide is a natural by-product of the combustion of fuel in light vehicles.  Given that tailpipe emissions of carbon dioxide cannot be destroyed or feasibly captured by control technologies in light vehicles, the feasible way to make the most substantial reductions in their tailpipe emissions of carbon dioxide now and for the foreseeable future is to reduce fuel consumption.   

This fundamental scientific reality was the basis for the President’s “Twenty in Ten” proposal to reduce domestic gasoline consumption by 20 percent in 2017.  A key component of his proposal was a significant increase in fuel economy standards for cars and light trucks.  By increasing standards beginning in model year 2010 for cars and in model year 2012 for light trucks, the President’s aggressive proposal was projected to save up to 8.5 billion gallons of gasoline in 2017 alone and reduce consumption by 5 percent.  These amounts were based on an assumption that, on average, fuel economy standards for both light trucks and passenger cars would increase 4 percent per year. 

            To enable us to increase the car standards responsibly, the President asked Congress to give us the authority to set attribute-based car standards just as we had set attribute-based light truck standards.  We took that step in response to the safety concerns expressed by the National Academy of Science in a congressionally mandated report.  NAS said that significantly and quickly increasing the fuel economy standards without first reforming the standards by making them attribute-based would likely lead to the further downsizing of vehicles and thus to additional deaths and injuries on our highways.  

            In December of last year, Congress opened the way to substantial increases in the car standards when it enacted the Energy Information and Security Act (EISA).  EISA mandated that the car standards and light truck standards be set high enough to ensure that the combined industry-wide average reaches at least 35 mpg in model year 2020.  It not only gave us the authority to set attribute-based car standards, but also mandated that both car and light truck standards must be attribute-based. 

            Using the guidance and new tools provided by EISA, we have proposed standards for model years 2011 to 2015.  Those standards are based in large measure on the joint work of the technical staffs of our agency and the Environmental Protection Agency.  Our staffs met nearly daily for seven months and completely revamped the foundations of CAFE rulemaking.  For example, they reviewed and revised the list of technologies that will be available during those years and updated the estimated costs and effectiveness figures for those technologies.  In addition, they updated and refined assumptions, methodologies and models.

            Our proposed fuel economy standards were developed with the aid of cost-benefit analysis.  We updated our benefit estimates as well as our cost estimates.  The benefits consist primarily of three things:  the fuel saved, the contribution that fuel savings makes to energy security and independence, and the reduction in carbon dioxide emissions resulting from that fuel savings.  We updated the dollar values of the first two and for the first time placed a value on the third.  We recognize that there are uncertainties regarding each of these values and have requested public comments on all of them.  We then conducted a balancing that ensured every dollar we ask companies to spend for better fuel economy returns at least one dollar’s worth of benefits.

            The proposed standards would increase fuel economy 4.5 percent per year over the 5-year period ending in 2015.  This rate substantially exceeds not only the 3.3 percent per year needed on average to meet the 35 mpg minimum established by Congress last year, but also the 4 percent per year increase called for in the President’s Twenty-in-Ten proposal.  An average annual increase of only 2.1% for combined fleet from 2016 onward would be needed to reach the required level of 35 mpg by model year 2020.

For passenger cars, the proposal would increase fuel economy from the current 27.5 miles per gallon to an industry average of 35.7 miles per gallon by 2015.  For light trucks, the proposal calls for increases from 23.5 miles per gallon in 2010 to an industry average of 28.6 miles per gallon in 2015.  We estimate achieving these levels of fuel economy would require nearly $50 billion of investments in fuel saving technologies through 2015.

These standards are tough, but achievable and necessary.  All told, the proposal will save nearly 55 billion gallons of fuel and a reduction in carbon dioxide emissions estimated at 521 million metric tons over the life of the affected vehicles. 

To provide manufacturers with added flexibility, we have proposed regulations permitting them to transfer and trade compliance credits. 

We will soon be receiving public comments on our proposal.  Our decisions about the final rule will be reached after careful analysis of the comments and with the benefit of full analysis of the environmental impacts of the alternatives before the agency.

We expect to make a final decision this year, less than one year after the enactment of EISA.  This will be an accomplishment in which we can all take credit and pride.

I would be pleased to answer any questions.

STATEMENT OF

VICTORIA COX,
SENIOR VICE-PRESIDENT FOR NEXTGEN AND OPERATIONS PLANNING

BEFORE THE

HOUSE COMMITTEE ON SCIENCE AND TECHNOLOGY

ON

THE NEXT GENERATION AIR TRANSPORTATION SYSTEM,

SEPTEMBER 11, 2008

Good morning, Chairman Gordon, Congressman Hall, and Members of the Committee.  I am Victoria Cox, Senior Vice-President for NextGen and Operations Planning in the Air Traffic Organization at the Federal Aviation Administration.  I thank you for the opportunity to testify today about the status of the work we are doing to develop and deploy the Next Generation Air Transportation System (NextGen) and to discuss how we are providing operational, environmental, and safety enhancements that deliver benefits to our customers today and into the future.

As you know, NextGen is not a single capability or program to be delivered at some date in the future; it is a portfolio of capabilities and programs that we are beginning to deliver now- and will continue to provide in an evolutionary manner.  It is also important to remember that NextGen is not simply about air traffic capabilities, but fostering improvements in ground infrastructure, aircraft technology, and alternative fuels.

Much progress has been made during the past year.  We have moved to accelerate initiatives that yield benefits to stakeholders in the near- and mid-term.  We have also taken steps to ensure a more holistic approach to managing NextGen and related legacy programs.  Last spring, the Secretary of Transportation and the NextGen Senior Policy Committee, which was established by Public Law 108-176  (Vision 100) and is chaired by Secretary Peters, asked us to take immediate action to accelerate the deployment of NextGen.  In response to this call, the FAA and the other NextGen agencies have focused on accelerating deployment of operational improvements to address the greatest need and on developing the capabilities that will provide the greatest benefit.  FAA has leveraged its research and development investments to accelerate targeted implementations and development of critical capabilities.

The introduction and wide-spread use of precision navigation tools that deliver increased precision to our operations represent the first step in our transition to NextGen. We are focusing deployment of Area Navigation (RNAV) and Required Navigation Performance  (RNP) around our most congested airports, using these tools to increase capacity and operational efficiency.  Partnerships with operators equipped to perform these procedures are yielding the biggest benefits from increases in operational efficiency and reductions in fuel use and emissions.  Today, 87 percent of commercial operators are equipped to fly RNAV routes and procedures; and 39 percent are equipped to fly the RNP Special Aircraft and Aircrew Authorization Required (SAAAR) approaches that allow design of flight paths to achieve more optimal use of airspace.  FAA has approved these types of approaches at Atlanta, Dallas/Fort Worth, Newark, Washington Dulles, LaGuardia, Chicago Midway, Miami, and San Francisco.  To date this year, we have published 20 RNP SAAAR approach procedures at eight airports, including San Jose, Washington Reagan National, Indianapolis and Los Angeles.  We have also published 63 RNAV Standard Instrument Departure (SID) and Standard Terminal Arrival (STAR) procedures at 45 airports, including Atlanta, Charlotte, Cincinnati, Newark, Orlando, Phoenix, Portland (OR), Santa Monica and Tucson. 

We are also seeing benefits today from the introduction of Optimized Profile Descents or OPD.  The OPD lets pilots use the Continuous Descent Arrival (CDA) technique to fly a continuous descent path, rather than the traditional “step downs” typically flown today.  Airplanes initiate descent from a high altitude with engines at low power and, ideally, maintain a continuous descent until cleared to land.  Flight demonstrations at Louisville’s Standiford Airport and testing at Atlanta Hartsfield have shown fuel savings averaging about 50-60 gallons of fuel for the arrival portion of flights and a reduction of as much as 1200 pounds of carbon dioxide per arrival. Significant noise reduction is also achieved through the later deployment of flaps and landing gear allowed by the CDA’s gradual reduction in speed. Under its NextGen Demonstration program, FAA is continuing with targeted implementations of  Optimized Profile Descent procedures at San Diego in addition to Atlanta and is cooperating with the United States Air Force Air Mobility Command to introduce OPD procedures with its C17 fleet in Charleston, SC.  OPD procedures have been instituted in Los Angeles on a permanent basis and are delivering major benefits in terms of operational efficiency and the environment.

Another NextGen-related demonstration program is the Atlantic Interoperability Initiative to Reduce Emissions (AIRE), a research and technology development venture between FAA, the European Commission and industry partners.  AIRE focuses on up-grading air traffic control standards and procedures for trans-Atlantic flights.  A similar initiative in the Asia-Pacific region, the Asia and South Pacific Initiative to Reduce Emissions (ASPIRE) has also been initiated.  In fact, tomorrow Air New Zealand is operating a flight, nicknamed ASPIRE I, from Auckland to San Francisco that will demonstrate some of the potential efficiencies.  Our Vice-President for Enroute and Oceanic Services will be onboard.  Both of these initiatives will enhance fuel efficiency while reducing environmental impacts.  Our first AIRE demonstrations showed one percent fuel savings in oceanic airspace – a significant amount of fuel and carbon emissions for these very long flights.

Other near-term benefits stemming from targeted implementations of the NextGen acceleration initiative include the introduction of surface management tools at JFK with the accelerated introduction of the Airport Surface Detection Equipment – Model X (ASDE-X).  FAA, in partnership with the Port Authority of New York and New Jersey and airlines, is providing information about surface traffic in both movement and ramp areas on the airport to Airline Operation Centers, air traffic controllers and the FAA Command Center.  This information gives common situational awareness that will allow airlines to better manage movement of their aircraft in crowded ramp areas.  The inability for airlines to know the exact location of their aircraft on the surface relative to other traffic contributes to surface gridlock and difficulty moving aircraft back to gates when required. As of last month, this much-needed information is available.

This capability stems from a joint FAA/NASA research and development project at Memphis with FedEx and Northwest Airlines.  The Memphis project is developing a surface traffic management system that employs a two-way, collaborative environment between the FAA and airlines to significantly improve the efficiency of ground operations and will be integrated with arrival and departure traffic to enable the most efficient use of airport and terminal facilities and reduce emissions that impact air quality.

These and other demonstrations are providing valuable information that will assist FAA in developing standards and procedures for operations in the NextGen environment while providing immediate benefits to targeted areas.   FAA plans to continue these activities in an integrated test bed approach that focuses on Florida, the east coast, Texas, and the Gulf of Mexico and takes advantage of early Automatic Dependent Surveillance-Broadcast (ADS-B) deployment.  Upcoming demonstrations include tailored arrivals in Miami starting later this month with American Airlines and with Air France.  We will also begin integrating predictive weather information as part of the Traffic Management Advisor (TMA) at Daytona Beach with Embry Riddle and a consortium of companies in November.  We have over 20 partners from the airlines, industry, academia, and other government agencies that are involved in demonstrating the effectiveness and safety of integrated NextGen capabilities.  We will model these and another demonstration in ways that enable more rapid, widespread deployment of these capabilities in the future.

NextGen will bring major changes to the roles and responsibilities of all the participants in the NAS, especially the controller, as the NAS becomes more automated and some tasks are delegated to the pilots flying more sophisticated aircraft.  A strategic job analysis has been initiated to examine how changes to technology, roles, responsibilities and procedures will impact the aptitudes, knowledge, skills and abilities that we will expect from controllers as NextGen matures.  This will enable the NAS to go from a “controlled” airspace environment to a “managed” airspace environment, allowing automation to assist with decision-making. 

The human factors research program has also delivered products that enable the use of data communications in the en route domain and is now focused on the increased use of RNAV, limited self spacing, and novel modes of grouping aircraft to enable an increase in capacity while reducing controller workload and error potential. 

Another key NextGen transformation is the move from Forensic Safety Systems to Prognostic Safety Systems, as evidenced by the development of the Aviation Safety and Information Analysis and Sharing (ASIAS) system.  The ASIAS program integrates a large number of previously unrelated data sources from both government and industry into a comprehensive safety picture that can assist in identifying emerging risks and enabling earlier interventions against these risks before they can lead to accidents.

Research and development in the weather arena is providing advanced weather capabilities to improve NAS operations during adverse conditions.  This requires improvements in weather forecasting and observation network capabilities as well as integration of weather into decision support tools.  Improvements in forecasts and observations quality developed by the Aviation Weather Research Program (AWRP) are aimed at providing more accurate aviation weather forecasts for phenomena such as turbulence, convective activity, icing, and restrictions to visibility.  The Weather Technology in the Cockpit (WTIC) program will facilitate the development of technologies necessary to integrate weather information into aircraft-based decision support systems. WTIC will enable pilots to access weather information similar to that being utilized by air traffic controllers and dispatchers on the ground.

In Fiscal Year 2008, the wake turbulence research program completed prototype evaluations of the Wake Turbulence Mitigation for Departures tool, a product of NASA and FAA research and development, that permits increased departure capacity from airports with closely spaced parallel runways.  Prototype evaluations of the system were conducted at Houston Intercontinental and Lambert St. Louis airports.  Another application of research and development has been wake turbulence data collection and analysis in support of a National Rule Change which would allow the use of ILS procedures to Closely Spaced Runways for specific aircraft types, thus increasing capacity at five specific airports. 

The wake program, along with global partners, has evaluated separation standards for new aircraft (B-747-8, A380) and has re-evaluated the B757 family of aircraft.  We have also developed a methodology and optimization tools for the re-evaluation of wake turbulence categories and separation standards for today’s aircraft fleet mix, which has changed significantly since the early 1990’s.  Working jointly with European Air Navigation Service Providers and aircraft manufacturers, FAA is seeking a harmonized set of wake categories and wake separation minima for the NAS and International fleet mixes. 

In an example of concept validation that shows great promise, FAA researchers are developing the concept for an Integrated Arrival/Departure Control Service that we are calling “Big Airspace.”  Employing modeling and simulation, including human-in-the-loop simulations, researchers used scenarios that incorporated a generic large metropolitan area, a major airport and three small airports into the same Terminal Radar Approach Control (TRACON) facility.  The “Big Airspace” concept extends terminal procedures to a portion of en route transition airspace, increasing the number of RNAV routes, and incorporating dynamic resectorization (a fundamental NextGen concept) to allow airspace boundaries to be more flexible.  A key element of “Big Airspace” is the incorporation of all operations into one facility to reduce the amount of cross-facility coordination needed to safely manage traffic into and out of busy areas.  Human-in-the-Loop simulations employed both terminal and en route controllers as well as pilots who flew simulated aircraft linked to the simulation.  Results of the modeling and these simulations showed that controllers could handle up to 50 percent more traffic. With the introduction of data communications, controllers may handle up to 150 percent more traffic before performance degraded, all without a significant change in the number of operational errors and with a significant decrease in the number of conflicts. 

With 2012 projected traffic, “Big Airspace” simulations showed increased operational efficiencies of about a minute of flight time and five nautical miles in scenarios with weather present.  To provide context for these savings, Southwest Airlines has indicated that for its operations a single minute of time saved on each flight contributes an annual savings of up to $25 million in fuel per year. Extend this to the number of flights operated by all carriers in major metropolitan areas and you can see that “Big Airspace” adds up to tremendous savings for all our airlines.    FAA is building towards implementing “Big Airspace” as its mid-term concept in high density metropolitan areas.

Accelerating air traffic management improvements is leading to efficiencies and reducing fuel burn, but we are also pursuing other R&D strategies to mitigate NextGen environmental impacts.   We are hastening the development of promising environmental improvements in aircraft technology. The President’s budget funds a research consortium called Continuous Low Emissions, Energy and Noise (CLEEN) which will allow us to work with industry to accelerate the maturation of technology that will lower energy, emissions and noise.  CLEEN offers a good example of FAA and NASA partnership in advancing the NextGen plan as we worked together closely in developing this initiative to mature technology with NASA’s foundational research efforts.

We are also exploring the potential of alternative fuels for aviation.  Fuels that improve emissions performance at both the local and global level not only help the environment, but also enhance energy security and supplies.  Issues of fuel supply and costs are having an increasing impact on the shape of the U.S. aviation system- as fuel costs now approach up to 40% of airline operating costs. To this end, the FAA helped form – and is an active participant in – the Commercial Aviation Alternative Fuels Initiative, or CAAFI.  We have already seen coal-to-liquid and gas-to-liquid fuels in jets, and most recently completed a bio-fuel flight demonstration.  Alternative fuels will be the “game changer” technology that gets us closer to carbon neutrality.  Alternative fuels are a part of the CLEEN effort.

Activities like these that consist of concept validation employing modeling and simulation, prototyping and field demonstrations in an operational environment can accelerate the transition from concepts and research and development to implementation of operational systems.  FAA is employing this approach in an effort to accelerate NextGen implementation.  Not only will this approach speed the development of NextGen operational improvements, it is also aimed at speeding their acquisition by accomplishing, in parallel, required steps in FAA’s Acquisition Management System.

Another way that FAA is accelerating transition from research to implementation is through Research Transition Teams (RTT) between NASA and FAA, facilitated by the JPDO.  The goal of the RTTs is to ensure that R&D needed for NextGen implementation is identified, conducted, and effectively transitioned to the implementing agency.  Four teams are successfully underway with NASA and FAA engagement.  

The approaches described above are mechanisms we have established to ensure that we retain the focus on the goals of NextGen while moving expeditiously to incorporate changes into the National Airspace System which support those goals and begin to achieve the benefits of a transformed system in a timely manner.

This year has seen a shift in focus for NextGen from planning to action.  The realignment of responsibilities for NextGen under a Senior Vice President for NextGen and Operations Planning is an indication of that changing focus of NextGen from purely planning and research to actual implementation and integration of technologies that will transform the National Airspace System.  As we enter this new phase, the Agency decided to place accountability for all aspects of NextGen, including management of the NextGen investment portfolio, under one senior official.

This realignment also responds to stakeholder requests for a single point of accountability for NextGen and addresses the suggestion raised by Industry, including members of JPDO Working Groups, that more focused oversight by FAA of JPDO deliverables would be desirable.

With the establishment of the NextGen and Operations Planning organization under the leadership of a Senior Vice President, the Joint Planning and Development Office (JPDO), the Operations Planning function, and the new Office of NextGen Integration and Implementation have a common reporting structure. For the FAA this ensures that the Agency acts promptly to achieve the JPDO vision by accomplishing the right kind of R&D and that a steady stream of improvements taking us along the road to NextGen are delivered for implementation and coordination with legacy systems operations.  This arrangement increases FAA support for JPDO Working Groups as well as cross-agency initiatives by closer linking of FAA to JPDO.  

The Senior Vice President for NextGen and Operations Planning is responsible for implementation of all elements of NextGen, most of which are executed by other service units in the Air Traffic Organization and other lines of  business in the FAA, and has decision authority over all matters related to NextGen integration and implementation including allocation within the Agency of the $688 million NextGen budget request for fiscal years 2009.

NextGen implementation is a difficult and complex undertaking that cannot be accomplished without cooperation across the industry, the FAA and the NextGen partner agencies.  The Senior Vice President for NextGen and Operations Planning has a direct and immediate path to the FAA Administrator and the Secretary of Transportation should their assistance be required.

The highly successful FAA-wide Operational Evolution Plan (OEP) process is the basis for guiding NextGen integration and implementation and ensuring the cooperation of all elements within the FAA with NextGen responsibilities. This process includes all FAA organizations, within and outside of the ATO including the JPDO.  The process tracks specific capability improvements through R&D, field demonstration, investment decision, acquisition and implementation, with clear objectives that result in specific commitments to the operating community outside FAA.  An executive oversight board (NextGen Management Board) at the Associate Administrator level, chaired by the Deputy Administrator, oversees the process. A review board (NextGen Review Board) manages the flow of improvements from concept, through R&D, to investment decision, to implementation.  Aviation community participation will be improved through a formal advisory process, Industry Days, and stepping up stakeholder participation at the SPC, which encourage feedback from users, operators, and developers.

An important product of the process described above is the NextGen Implementation Plan, the latest version of which was published on June 30, 2008.  The plan details implementation commitments for the near-term (between 2009-2011), and describes more than 30 additional improvements targeted for introduction between 2012 and 2018.  This version shows how FY 09 research and development projects move us toward specific outcomes.   The entire plan can be accessed on line at www.faa.gov/nextgen.

As directed by the Secretary of Transportation, who is chair of the NextGen SPC, JPDO will continue to focus on long-term (beyond 10 years) research and development and cross-agency coordination with FAA placing emphasis on near-term implementation and mid-term planning over a rolling 10 year timeframe.   FAA will ensure that the Agency’s implementation plans and Integrated Work Plan are aligned for the near and mid-term, while keeping an eye to the future that JPDO is defining through the long-term R&D plan.  The JPDO Integrated Work Plan (IWP), will also be published this month, is still a work in progress, and the elements in it have not yet been prioritized.  That said, it represents a great amount of work across the NextGen agencies and industry to document their initial development work and planning.  

An overarching goal, and a clear responsibility of JPDO, is a long-term R&D program, with well-defined and prioritized research goals and supporting activities and that responsibility will be clearly assigned to the Partner agencies.  Success will depend on assuring that agency R&D budgets are linked.  Research must be aligned to leverage cross-agency investments and deliver products that will transition to implementation. 

We are confident that planned investments lead to the capabilities described out to 2018.  These are investments in the five transformational programs discussed later, as well as to seven solution sets. In total, they fund research, engineering, analysis, demonstrations, concept validation and ATC infrastructure enhancements.  The far-term, beyond 2018, is dependent on research that is ongoing or planned in coordination with the JPDO. The results of that research will be used to guide the far term development.   JPDO will continue to maintain the vision of NextGen and will update the Concept of Operations in accordance with results of the long-term research that it is charting. 

JPDO will also continue to produce a yearly Progress Report.  This year’s progress has been noteworthy.  The Senior Policy Committee (SPC), chaired by the Secretary of Transportation, provides directed focus on important efforts including a government-wide Safety Management System; a collaborative weather initiative involving the Department of Commerce (DoC), FAA and the Department of Defense (DoD); an initiative for net-centric aviation information sharing; and planning for integrated aviation surveillance with the DoD, Department of Homeland Security (DHS) and FAA. 

JPDO has formalized organizational relationships with partners to facilitate transfer of technology for NextGen application by establishing the previously described Research Transition Teams to facilitate smooth transition of research products from NASA to FAA.  Additionally, the DoD has established a NextGen Joint Planning Office with the U.S. Air Force leading to coordinated DoD contributions and technology transfer.  The DoD, DHS and FAA also jointly invested in a demonstration of Network Enabled Operations technology.

JPDO completed a gap analysis of NextGen partner agency programs against the Integrated Work Plan.  The gap analysis identified seven critical interagency focus areas, including various ATM research topics, research to mitigate environmental constraints, security risk management, and the verification and validation of complex systems.  FAA was identified as the lead for three of the focus areas, NASA for two, DHS for one, and JPDO for one.  Working with the partner agencies, the JPDO will incorporate operational improvements that address these gaps into the Integrated Work Plan and through the governance process, including the JPDO Board and SPC, will encourage partner agencies to include activities that support these operational improvements in their implementation plans and future year budgets.

As we move forward with NextGen it is important for us to measure our progress by defining our near-term, mid-term, and long-term goals with suitable performance metrics.  The right metrics will allow us to determine not only how well we are doing but also the impacts of events that reduce or delay progress.   FAA plans to employ three methods of measurement.  First, we will track progress against milestones established in the NextGen Implementation Plan.  These are linked directly to the National Airspace System Enterprise Architecture decision points. We will also track investments, measuring whether specified products are delivered on time and on budget.  We are also developing methods to measure and report on benefits accrued with the implementation of NextGen capabilities in an integrated fashion rather than the case by case approach that we take today. 

The FAA’s National Aviation Research Plan (NARP) published in February 2008 identifies $740 Million for NextGen R&D in the President’s Fiscal Year 2009-2013 budget with $83.5 Million requested in Fiscal Year 2009.  Much of the other R&D work contained in the 2009 request is NextGen enabling.

My testimony has focused on R&D, Advanced Technology Development and Prototyping and Demonstration investments.   Major NextGen transformational programs are making progress as well. ADS-B has continued to meet all the program milestones. Since the national contract was awarded last summer, the program has deployed the ground infrastructure in the Southern Florida key site area. The system has for the first time  equipped pilots to receive traffic and weather in the cockpit for enhanced situational awareness. The system will reach an In Service Decision (ISD) for essential services for commissioning into the National Airspace System (NAS) in November 2008.  Critical services IOC and ISD is planned for 2010. 

While the agency has been busy with deploying the ground equipment, we are also simultaneously working on the rulemaking for ADS-B. The Notice of Proposed Rulemaking (NPRM) was published in October 2007. The comment period closed in March 2008 and the agency is taking into account every single comment that was received. We have been working closely with all facets of the aviation community through the ADS-B Aviation Rulemaking Committee (ARC). We will consider all the recommendations from the aviation community in developing the final rule, which we estimate will be published in spring 2010.

The System-Wide Information (SWIM) Program recently awarded a $37M contract for commercial, off-the-shelf (COTS) software to Iona Technologies of Waltham, Massachusetts.  This software will help FAA develop interfaces between systems more quickly and cheaply, and will help establish new connections between systems and with new users – just what’s needed for NextGen. 

The Data Communications program and the NAS Voice Switch program have both completed development of initial program requirements, and the NextGen Network Enabled Weather (NNEW) program has begun analysis to develop standards for universal access to a weather data base, which will contain forecast information of interest to all national airspace participants including FAA, Department of Defense, National Weather Service and our European partners.

I thank both this Administration and this Congress for supporting the FAA’s NextGen budget requests and hope that issues surrounding the FAA’s reauthorization are quickly resolved.  Be assured that we will identify NextGen as a key programmatic and budgetary issue requiring decisions from policymakers in the incoming Administration. 

Given the impact of aviation on the U.S. economy and the longstanding support from this Committee, this Congress, and most of the aviation community, I sincerely believe that the impetus for NextGen and its program focus will continue and not suffer due to transition activities.

Mr. Chairman, this concludes my testimony.  I would be happy to answer any questions the Committee may have.

U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION

STATEMENT OF

SEAN T. CONNAUGHTON
MARITIME ADMINISTRATOR

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON COAST GUARD AND MARINE TRANSPORTATION
U.S. HOUSE OF REPRESENTATIVES

ON THE

MARITIME ADMINISTRATION’S BUDGET REQUEST FOR FISCAL YEAR 2009

FEBRUARY 26, 2008

Mr. Chairman and Members of the Committee:

I welcome the opportunity to appear before you today to discuss the Maritime Administration’s budget request for Fiscal Year 2009.

We are seeing important and exciting changes in the U.S. maritime industry, and at the Maritime Administration.  The marine transportation industry is a highly sophisticated, global, intermodal transportation network that is absolutely vital to America’s economy and continued prosperity.  The industry is in a period of renewal and expansion.  The Class of 2007 graduates from the Nation’s maritime academies found many more opportunities for employment in the maritime industry than they have found in years past.  Private industry is pointing the way toward greater use of our waterways to relieve congestion on the landside transportation system.

A half-century ago, the maritime industry pioneered the use of the container, now the standard instrument of trade all over the world.  That paved the way for double-stacked trains and the development of door-to-door logistical operations, software and tracking systems. This evolution transformed the way we think about the business of moving freight and people, and has completely altered the transportation landscape and the role of transportation in our lives.  Marine transportation is now a system of systems—an integrated network, not just within the United States, but around the world. It must operate seamlessly.

The Maritime Administration is developing a framework to help guide decisions on federal, state, local, and private involvement and investment in the overall Marine Transportation System.  To that end, the Maritime Administration has realigned its headquarters offices, and established presence at the major U.S. gateway ports.  These offices, which will eventually be located at 10 of the largest American ports, will identify bottlenecks and ways to improve freight movement.  They will work with all stakeholders, promoting collaboration, and focusing particularly on planning and environmental issues. 

The Maritime Administration’s efforts this year have focused on issues with great possibilities for transforming the maritime industry and the transportation system: greater use of the nation’s waterways, or the Marine Highway; initiatives that provide more opportunities for training and employment of American mariners; and facilitating the upgrading of port infrastructure. 

In order to help ensure continued competitiveness, we must continue to tailor our maritime policy to the challenges of the 21st century.  At this time, I would like to address the Maritime Administration’s operations and training budget, summarize other provisions contained in the President’s budget, and mention some of the Maritime Administration’s accomplishments during the past year.

Operations and Training

The total budget request for the Maritime Administration for FY 2009 is $313,379,000, $117,848,000 of which is for the agency’s operations and training.  Operations and training activities include the costs incurred by headquarters and region staffs in the administration and direction of the various Maritime Administration programs such as the Maritime Security Program; port, intermodal and environmental activities; maritime labor, training and safety activities; monitoring compliance with cargo reservation statutes; administration of capital construction funds; and negotiation of agreements, understandings and arrangements to reduce barriers that restrict American access to foreign ports and markets. 

The operations and training funds requested also include $61,358,000 for the operation of the United States Merchant Marine Academy (USMMA, Academy) at Kings Point, New York, and $10,987,000 for continuing assistance to the six state maritime academies.  In FY2009, funding of $26,794,000 is requested for salary and benefits at the Academy, an increase of $1.1 million.  The funding request for Academy operations is an increase of $3.5 million, spread over several different operational areas.  Some of the areas funded under this budget activity include:  the Academy food service contract; uniforms; medical requirements; IT hardware replacements and improvements; equipment for accreditation; janitorial services; transportation leases; environmental and occupational safety; and maintenance and repair needs.  

The FY 2009 budget request for the Academy proposes funding for the Capital Improvements Master Plan (CIP) in the amount of $8.2 million to support high-priority maintenance and repair projects such as Americans with Disabilities Act renovations; new roofs for Academy buildings; and other priority maintenance and repair projects.  Major capital improvements have been postponed while we reexamine priorities in the CIP and complete resolution of financial management issues with Academy administration.   

The USMMA and the six State maritime schools are the only educational institutions that produce merchant marine officer graduates with a four-year bachelors degree.  These graduates have completed coursework in marine engineering and navigation; obtained a U.S. Coast Guard merchant marine officer’s license; and practical shipboard training.  They have first-hand experience in the mariner’s environment, thus enabling them to enter this professional workforce with confidence and self-reliance.  In peacetime, they create and operate efficient, cost-effective marine transportation systems.  In times of conflict, they crew the ships that support our troops.   

Since we are on the topic of the Academy and State schools, I cannot miss the opportunity to stress the importance of maritime education and training.  In today’s global economy, the maritime transportation system is becoming an even more vital part of our Nation’s prosperity than it has ever been before.  In 2006, foreign trade accounted for nearly 22 percent of our gross domestic product (GDP).  Estimates project that by 2020, foreign trade will account for almost 35 percent of our national GDP.  This will continue to place an emphasis on the marine transportation system as 95 percent of all foreign trade is moved by ship.

With an expanded reliance on foreign trade to the American economy, it is critically important to encourage and sustain American involvement and investment in the marine transportation system.  This is important for the economy during times of peace and a matter of survival during times of war or national emergency. 

Without trained and qualified people, the marine transportation industry cannot perform its essential role in the U.S. economy.  Such a workforce must include licensed and unlicensed seamen, shore side and shipyard workers and managers and operators of ships and facilities.  This need is especially acute given the global shortage of skilled seafarers.

An assessment of the current pool of licensed seafarers shows an adequate supply of officers for the current manning of the U.S. Jones Act fleet as well as the strategic sealift needs of our military.  However, the ability to meet these needs is quickly reaching a critical juncture.  Today, nearly 7,000 licensed American officers exist to crew our Jones Act and strategic sealift fleets with only 3,000 having sailed in the past two years.  The average age of a licensed officer is over 42 years old and the average has gotten older over the past few years.  The average Master and Chief Engineer is 51 years old, while the average Third Mate or Third Assistant Engineer (entry-level positions) is 33 and 35 years old, respectively. 

All of these factors lead to one conclusion; the United States must increase its pool of qualified licensed officers in the next ten years or face drastic repercussions for both national and economic security.  Those repercussions include an inability to move the military in time of war or emergency and the loss of an American presence in the international maritime sector.  The FY 2009 request indicates the Administration’s support for both the USMMA and the State Maritime Schools, and specifically addresses this concern by proposing to enhance the Student Incentive Payments (SIP) program at the State Maritime Schools with an administrative provision that amends the program to increase the annual SIP payment to students from $4,000 to $8,000 per academic year.

Maritime Security Program

The primary purpose of the Maritime Security Program (MSP) is to provide the Department of Defense (DOD) with assured access to commercial U.S.-flag ships crewed by U.S. citizen mariners to support national security requirements during war or national emergency.  DOD recognizes the importance of a strong partnership with the commercial maritime industry to ensure our nation’s defense and transportation needs are met.  The MSP also ensures that the intermodal assets of current U.S.-flag ship operators will be readily available to DOD, and plays an important role in ensuring that our nation has enough mariners.  The MSP fleet contributes approximately 2,400 mariner positions which are critical for national security crewing requirements.  With a diminished U.S.–flag merchant marine, a substantial portion of the pool of U.S.-citizen mariners would disappear, impairing our ability to crew Ready Reserve Force ships and other government-owned ships needed for national security.    

            Recently, MSP ships have contributed greatly to Operation Enduring Freedom and Operation Iraqi Freedom.  A total of 79 U.S.-flag commercial ships (including 63 current or former MSP ships) have either been employed by the Military Sealift Command (MSC) or the Military Surface Deployment and Distribution Command (SDDC) to transport military cargo.  SDDC reports that since September 11, 2001, U.S.-flag commercial ships have delivered over 360,000 twenty foot equivalent units (TEUs) of containerized equipment and supplies to support U.S. troops in Iraq and Afghanistan.  In addition, 34 of the 63 MSP ships utilized by MSC and SDDC also supported the rebuilding of Iraq.   

Under the FY2009 request, the MSP would continue to be authorized at its full funding level of $174,000,000.  The Maritime Security Act of 2003 authorized 60 ships for the MSP with payments up to $2.9 million per ship for FY 2009.  These funds will solely provide for payments to MSP operators for the 60 enrolled ships.  Program administration salaries and benefits are funded by the Operations and Training account.  

            MSP participants signed operating agreements with the Maritime Administration that provide for escalation of MSP payments to $2.9 million per ship per year in FY 2009.  Escalating payments were designed to offset the impact of inflation and to provide incentive for MSP operators to reinvest and upgrade their MSP fleet with newer, more modern and efficient vessels.  Since October 1, 2005, ten MSP ships have been replaced with newer ships and an additional 19 ships currently in the program will be replaced with newer vessels before the MSP authorization expires in 2015.       

Ship Disposal

By law, the Maritime Administration serves as the U.S. Government’s disposal agent for merchant-type vessels of 1,500 gross tons or more, and has custody of approximately 120 obsolete ships owned by the Federal government that are available for disposal.  These obsolete vessels are located at the James River Reserve Fleet site in Virginia, the Suisun Bay Reserve Fleet site in California and the Beaumont Reserve Fleet site in Texas

These vessels pose a risk to the local environment due to the presence of residual fuel, asbestos and solid polychlorinated biphenyls (PCBs); therefore, the disposal of these obsolete vessels continues to be one of the Maritime Administration’s highest priorities.  Our budget contains a request for $18,000,000 in FY 2009 for ship disposal.  Specifically, funding of $15 million would enable the Maritime Administration to dispose of 14 vessels from our inventory and defray costs to develop and implement a risk mitigation plan for compliance with the National Invasive Species Act, and for testing and containment requirements related to the Clean Water Act. 

Funding of $3 million would allow the agency to continue activities required to bring the Nuclear Ship Savannah (NSS) nuclear facilities into conformance with Nuclear Regulatory Commission SAFSTOR standards.  SAFSTOR is the pre-decommissioning condition in which a non-operating nuclear power plant is safely husbanded for the period of time between cessation of operations and dismantlement, disposal and license termination.  The NSS was originally laid-up and placed in retention long before the industry gained any substantial SAFSTOR experience.  As a consequence, it is now known that the NSS requires additional work before it can be considered satisfactory for an additional period of extended retention.  Such work includes the reduction of transient combustibles, reduction of radiological inventory, maintenance of the facility containment structure, and continued routine radiological surveillance and monitoring. 

The Maritime Administration will continue to investigate all alternatives to expedite the disposal of its obsolete vessels at the least cost, and where possible on a cost-recovery basis, while giving consideration to worker safety and the environment.  We intend to continue to utilize domestic recycling as the primary ship disposal method and will dispose of high and moderate priority ships that are available for disposal during FY 2009 through domestic recycling.  Disposals through artificial reefing, deep sinking of ships with the U.S. Navy and donation to not-for-profit groups will also be used to the maximum extent possible.  As opportunities arise, we will also continue to work with domestic and international organizations to accomplish vessel condition assessments, hazardous materials identification, waste stream minimization, and applied technology testing on our obsolete vessels.  We anticipate that in the future these activities could result in improved overseas hazardous materials remediation and ship recycling and lead to additional opportunities for environmentally safe and cost-effective vessel disposal internationally.  Currently, there are no foreign facilities qualified to compete for future ship recycling contracts.

Recently, Congress again stressed the importance of ship recycling in the National Defense Authorization Act of 2008, which requires that within 30 days of enactment, the Secretary of Transportation convene a working group to review and make recommendations on best practices for the storage and disposal of obsolete vessels owned or operated by the Federal Government.  This authority has been delegated to the Maritime Administrator, who will convene the working group.  I have already issued invitations to participate in the first meeting of the working group, which will take place in early March.  Participants will include senior representatives from the Coast Guard, the Environmental Protection Agency, the National Oceanic and Atmospheric Administration, the United States Navy, and other Federal departments, and agencies.  Concerned State environmental agencies may also be requested to participate.  Among the vessels to be considered by the working group are federally owned or operated vessels that are to be disposed of or recycled; to be used as artificial reefs; or to be used for the Navy's Ship Sinking Exercise Program (SINKEX).

The working group will examine current storage and disposal policies, procedures, and practices for obsolete vessels owned or operated by Federal agencies; examine Federal and State laws and regulations governing such policies, procedures, and practices and any applicable environmental laws; and within 90 days after the date of enactment of the Act, submit a plan to Congress to improve and harmonize practices for storage and disposal of such vessels, including the interim transportation of such vessels.  The plan will include a description of existing measures for the storage, disposal, and interim transportation of obsolete vessels owned or operated by Federal agencies in compliance with Federal and State environmental laws in a manner that protects the environment; a description of Federal and State laws and regulations governing the current policies, procedures, and practices for the storage, disposal, and interim transportation of such vessels; recommendations for environmental best practices that meet or exceed, and harmonize, the requirements of Federal environmental laws and regulations applicable to the storage, disposal, and interim transportation of such vessels; recommendations for environmental best practices that meet or exceed the requirements of State laws and regulations applicable to the storage, disposal, and interim transportation of such vessels; procedures for the identification and remediation of any environmental impacts caused by the storage, disposal, and interim transportation of such vessels; and recommendations for necessary steps, including regulations if appropriate, to ensure that best environmental practices apply to all such vessels.

As soon as practicable after the date of enactment of the Act, the head of each Federal department or agency participating in the working group, in consultation with the other Federal departments and agencies participating in the working group, shall take such action as may be necessary, including the promulgation of regulations, under existing authorities to ensure that the implementation of the plan provides for compliance with all Federal and State laws and for the protection of the environment in the storage, interim transportation, and disposal of obsolete vessels owned or operated by Federal agencies.  

The Act requires the Secretary of Transportation and the Secretary of Defense, in consultation with the Administrator of the Environmental Protection Agency, ensure that environmental best practices are observed with respect to the storage, disposal, and interim transportation of obsolete vessels owned or operated by the Department of Defense and that requirements of environmental law are to be complied with in the implementation of Section 3503.

To facilitate taskings of the working group, the Maritime Administration also has undertaken substantial environmental management actions to upgrade its ship disposal program.  For example, the Environmental Excellence Initiative, inaugurated one year ago, includes an interdisciplinary and comprehensive study to recommend best management practices for the fleet for incorporation into our action plan and the Environmental Assessment of fleet management and disposal.  These efforts, as well as closer coordination with other interested agencies, also will facilitate the working group and the adoption of a unified Federal position before various state interests and assist in the resolution of the current lawsuit brought by the Natural Resources Defense Council.

As you can see, Mr. Chairman and Members of the Panel, we have put a great deal of thought and effort into determining the best options for disposing of the backlog of obsolete NDRF vessels.  We are making progress.  Since October 1, 2007, seven vessels have departed the fleet sites – six of those since January 1, 2008.  I appreciate your continued interest and request your support in this matter, and assure you that ship disposal is of utmost importance to the Department.

 The National Defense Reserve Fleet and the Ready Reserve Force

      The National Defense Reserve Fleet (NDRF) was established in 1946 to meet reserve sealift requirements for emergencies and national defense purposes.  NDRF vessels are primarily located at three anchorages:  James River, Virginia; Beaumont, Texas; and Suisun Bay, California.  There are currently 236 ships in the NDRF, 44 of which comprise the Ready Reserve Force (RRF).  RRF ships are maintained in various states of readiness by commercial ship managers and can sail in either 5 or 10 days.   The Maritime Administration also assumed management of 8 Fast Sealift Ships from the Military Sealift Command in FY08.  These vessels will become permanently assigned to the RRF commencing FY09.

      The majority of RRF ships are located at port facilities along the East, West and Gulf coasts of the country in proximity to likely loadout ports established by the DOD.  When activated, RRF ships are fully crewed by civilian merchant mariners working to support DOD missions.  Our RRF ships are called upon to play a critical role delivering supplies to support our troops and to provide assistance during other crises.  In the Gulf War, Somalia, Haiti, Bosnia, and hurricane-ravaged Central America, the RRF carried out DOD support missions.  Ten NDRF vessels participated in relief and recovery efforts during Hurricanes Katrina and Rita, where NDRF vessels served over 260,000 meals and provided 83,165 bed rotations over a six month period. 

      Readiness and reliability of ships in the RRF are carefully measured.  Readiness is demonstrated by conducting maintenance sea trials during the year, and tested by conducting “No-Notice” turbo activations at the order of DOD.  The Maritime Administration’s goal is to successfully activate the RRF ships under no-notice conditions 100% of the time.  In FY 2007, there were 8 such tests with all of them meeting or exceeding their activation timelines.  Consistent, high operational reliability is also essential for effective support of DOD, and the goal is to maintain 98% operational reliability.  During FY 2007, the RRF achieved a reliability of 99.5% with 17 ships being called and operated for 1,711 days with only 8 days of unscheduled downtime.

America’s Marine Highways

      Over two billion tons of goods produced or consumed in the United States move through our nation’s ports and waterways each year.  This volume is expected to more than double over the next 20 years.  The number of waterway recreational users is also expected to grow by over 65 percent to more than 130 million annually in the next 20 years, and high-speed ferry transportation is experiencing rapid growth in response to land-transport congestion.   

      An important element of our Marine Transportation System (MTS) is “short sea transportation.”  The recently-enacted Energy Independence and Security Act of 2007 (Energy Bill) directs the Secretary of Transportation to “establish a short sea transportation program.”  This law represents significant progress for America’s Marine Highway, and provides another valuable tool for the Department’s initiative to reduce congestion.

The primary focus of the Energy Bill is to expand the production of renewable fuels, reduce dependence on oil, and address global climate change, along with increasing energy security and expanding the production of renewable fuels.  When establishing the program, the Secretary of Transportation is directed to designate short sea transportation projects to mitigate landside congestion.  Eight actions will be necessary to implement the bill:    

• Designation of short sea transportation routes as extensions of the surface transportation system;
• Designation of projects if they offer waterborne alternatives that reduce congestion;
• Memorandums of agreement between the Secretary and other Federal entities to transport federal cargoes via designated project services;
• Consultation with Federal, state and local governments to develop strategies to encourage the use of short sea transportation for passengers and cargo;
• Consultation with  shippers and transportation logistics entities to develop proposals for short term incentives;
• Establishment of a board of Federal, state and local governmental entities to identify and seek solutions to impediments hindering use of short sea transportation;
• Conducting research regarding environmental and transportation benefits, technology, vessel design and other improvements to reduce emissions, increase fuel economy and lower costs, and identify solutions to impediments to specific designated projects, and;
• Making Short Sea Transportation vessels qualified for Capital Construction Fund benefits.

The Maritime Administration has already begun work on this important initiative.  We are working with the Department to implement interim regulations by March 16, 2008, as required by the Energy Bill, with final regulations due by October 1, 2008.  A report to Congress is also required by December 19, 2008.  Successful implementation of this program will require both commitment and resources.  I have directed my staff to identify the personnel and funding requirements for submission in future budget proposals.  The President’s 2009 budget includes new funding of $311,000 to further initiatives to relieve congestion at the nation’s ports and to promote short sea shipping.  Examples of specific activities intended to increase use of America’s Marine Highway include helping to identify adequate terminal facilities for proposed operations; bringing shippers and carriers tog ether to generate cargo commitments; identifying appropriate Federal cargoes; and removing other disincentives to the Marine Highway. 

Shipbuilding

      As you know, the Maritime Administration administers a Government guaranteed loan program, commonly referred to as the Title XI program.  Title XI loan guarantees enable shipowners and shipyards to borrow private sector funds on more favorable terms than might otherwise be available.  The Budget requests $3.5 million for administration of this program and to manage the existing loan portfolio. 

Conclusion

Recent years have presented MARAD with significant challenges, which I expect to continue in FY 2009.  I believe that the Maritime Administration is up for these challenges, and welcome the opportunity to continue our role in preserving both economic and national security.  Your continued support will help us to do our part in our mission.  This concludes my prepared statement.  I would be happy to address any questions you may have at this time.

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