Many in the aviation industry as well as the general media are predicting a summer of congestion in the U.S. skies and at airports as the air carriers return to pre-9/11 activity levels. At the same time, business aviation keeps charging ahead, despite high fuel prices, and the introduction of the first of the new very light jets this summer is predicted to expand bizav’s scope even further. Yet, storm clouds are brewing in Washington debate circles, where the airlines and the Federal Aviation Administration are calling for new mechanisms for funding the U.S. air transportation system. Meanwhile, the Transportation Security Administration, which in May released its long-awaited air cargo final rule (sidebar), is gearing up for its long-term initiative of determining the next phase in passenger screening.
According to the Air Transport Association, which represents the air carriers, a study conducted by the Campbell-Hill Aviation Group, Inc., estimates that U.S. commercial aviation drives some $1.2 trillion in output, $380 billion in earnings, and 11.4 million jobs. Yet, the airline industry has been losing billions annually in recent years. For those in the position of managing the business of U.S. airports, that fact has translated into increased pressure to reduce costs to the carriers. At the same time, the airlines are heightening pressure on airports to provide more basic facilities, ones that help reduce rates and charges to airlines.
And, in an era when many airports have turned to creative mechanisms and incentives to attract air service, some have begun to take a serious look at providing more of the aircraft handling services in an effort to facilitate the decision by an airline to serve their markets. This has the American Association of Airport Executives studying the need for an offshoot trade group, such as the Contract Tower Association, to help create guidelines on airline servicing.
For Airports Today, It’s All About Planning
According to Catherine “Kate” Lang, the FAA’s deputy administrator for airports, the uncertain situation with the air carriers has placed an increasing emphasis on planning for many airports. Lang, speaking at the annual AAAE meeting of airports in San Diego in late April, told managers that the preliminary analysis of the agency’s current update of the National Plan of Integrated Airport Systems (NPIAS) is quite telling.
Every two years, FAA updates the NPIAS, which serves as the initial guideline under which airports are eligible for federal funding. It’s also used to gauge capital improvement needs for the system.
Lang says that for the first time in decades, the NPIAS estimates show a drop in capital needs, from $46 billion to $39.5 billion. The biggest drops, she says, show up in terminal construction and access projects. At the same time, planning jumped some 53 percent, which Lang says “makes sense” because of the high degree of uncertainty brought about by the airlines’ ongoing financial challenges.
Few outside the Bush Administra-tion would argue, however, that such numbers indicate a reduced need for Airport Improvement Program funding, which is authorized for FY07 at more than $3.6 billion but which the Administration proposes to fund at $2.75 billion. This battle has moved to the top of the lobbying list for airport groups, who seek to restore funding at the authorized level.
While that debate ensues, airports and other industry groups are digging in for the larger, longer term battle over system authorization after FY07. At the center of that debate is a call by ATA and FAA for a new formula for funding the system, one based on “user fees.”
Exploring New Options: Feeding the Trust Fund
The Airport and Airway Trust Fund is the mechanism by which aviation taxes are collected and disseminated — for FAA operations and air traffic control, as well as AIP. The airlines, through a unanimous proposal via ATA, and FAA are making how the system is funded the center of the reauthorization debate, expected to heat up later this year. (The current system is “authorized” through September 30, 2007.)
Trust fund revenues are generated by a combination of taxes that were last authorized in 1997. They include a passenger ticket tax of 7.5 percent of the price of a domestic ticket; a flight segment tax of $3.30; an international departure/arrival tax of $14.50 per international passenger; a 6.25 percent waybill tax on domestic cargo and mail; a general aviation jet fuel tax of 21.8 cents per gallon; a GA aviation gasoline tax of 19.3 cents per gallon; and, a commercial fuel tax of 4.3 cents per gallon.
ATA maintains that because the airline ticket tax — the primary money driver — is a fixed percentage of the ticket price, revenues fluctuate, making the current system unpredictable. And, common to all the affected groups is a call for more predictability in obtaining and distributing funds. Also common is their call for a continuing “general fund” contribution from Congress, which currently is set at some $3 billion annually, according to the U.S. DOT Inspector General.
ATA’s “vision” for FAA funding reform and air traffic control modernization includes the establishment of a “cost-based” user fee structure for generating revenues. It seeks a fee structure based more on individual aircraft time-in-system, particularly for business jets. ATA is calling for piston aircraft that use avgas to maintain the fuel tax as their way to pay for use of the system.
FAA, it appears, is moving toward the ATA position and in fact recently forwarded its proposal for future funding to the Office of Management and Budget for review. While FAA Administrator Blakey says that plan should be released soon, some in industry suggest it won’t appear publicly until after the November national mid-term elections.
General aviation groups see little need to change the current funding formula, and instead call on FAA to get its rising costs under control. Ed Bolen, president of the National Business Aviation Association, has lately suggested that business aviation is open to discussing whether or not the rate of the fuel tax needs to be adjusted, but flatly rejects ATA’s claim that a watershed change is necessary.
One question that may need to be answered first and foremost is whether or not the trust fund is in danger of running short of what’s needed to run and improve the system. At the outset of fiscal year 2006, the cash balance in the trust fund was estimated at $11.3 billion; the uncommitted balance was an estimated $1.7 billion. FAA maintains that in time revenues won’t meet expenses, which is why a new formula should be considered. Recent studies by the Inspector General’s office and the Government Accountability Office question this, with both indicating trust fund levels have been increasing since 2004 are are nearly as high as 1999 levels.
ATC Modernization
Much of ATA’s call for reform has to do with its desire to see the U.S. air traffic control system fully modernized and structured independently of FAA and ongoing Congressional oversight. Congress took the initial step toward this goal with the creation of the FAA’s Air Traffic Organization and the Joint Planning and Development Office. The JPDO is intended to serve as a coordinator among seven federal agencies as well as the private sector.
However, as a recent session on ATC modernization at the AAAE meeting in San Diego indicates, much work remains to be done. Neil Planzer, a Boeing air traffic management VP, says the biggest obstacle seems to be an industry that’s averse to change. “This is not a technology issue,” he says, “it’s a policy issue.” He estimates that modernizing the ATC system is a multi-billion dollar investment for at least the next seven years and beyond.
TSA Looks Long Term
While many U.S. airports continue to tackle the issue of getting in-line baggage screening systems installed at their facilities, TSA is rolling out its long-term plan for airport security, which places a heavy emphasis on checked baggage screening integration and technology.
Andy Lee, an analyst with DHS’s Transportation Security Laboratory, says the plan, called Manhattan II, has the concepts of detection and identification at its core. It’s a two-part approach: the screening devices, which currently are undergoing significant development; and “the common element,” which includes people and related systems.
Lee foresees a “plug and play” type of system evolving, affording more network connectivity in which systems from multiple vendors can be used at any U.S. airport. He sees checkpoint screening becoming less intrusive, in line with what airports have been seeking.
