FEDEX CEO SMITH TESTIFIES ON FUNDING FOR FAA

The Senate Finance Committee issued the following testimony from a subcommittee hearing: TESTIMONY OF FREDERICK W. SMITH CHAIRMAN, CEO AND PRESIDENT, FEDEX CORPORATION CHAIRMAN, FEDEX EXPRESS ON FUNDING THE FEDERAL AVIATION...


But in order for us to be able to offer U.S. companies our hallmark "just-in time" service, we need an air traffic control network that works well and consistently. Our customers don't really care that a delay was "outside of our control" - that we had ATC delays or whatever. They just want - and expect and deserve - their air shipments to reach the destination on time. We want to operate an on-time aviation machine, making airline schedules "just-in time" rather than "just-in-case."

A modernized air traffic control system is not just an option anymore, but an absolute necessity. We agree with the Administrator who told a Senate gathering last week: "If we wait for tomorrow, we're toast." The air cargo segment is growing faster than the passenger portion, with growth rates averaging 3.3% domestically and 6.3% internationally per year expected until 2020. We cannot sustain this expansion, and offer the services needed by a growing U.S. economy, if the ATC system continues to be overwhelmed. Airlines cannot be asked to spend each day merely trying to catch up to the schedule. That's why we think the issues facing you here today are important not just to the airline industry or to the air cargo industry, but to the entire U.S. economy.

S. 1300, sponsored by Senators Rockefeller and Lott, sets forth a reasonable approach and a blueprint for success in the development of a modernized air traffic control system. It provides for a future NextGen system that will address the crying needs for air traffic modernization and includes elements that provide linkage between financing and usage. We worked closely with Senators Rockefeller and Lott and all recognize and support the hard work that they did to move that bill forward. But as I said before, that is only one piece of the puzzle. This Committee has the responsibility of providing the overall funding stream for the FAA. It is a challenging and daunting task, and as you are well aware there are extremely divergent and strong opinions about the best way to address the overall funding stream for the FAA. At FedEx, we are not wedded to any one financing system. What we want is to continue to pay our fair share into the system. Right now, all-cargo air carriers pay an amount in excess of 100% of their burden on the ATC network, through a combination of the cargo waybill excise tax and the fuel tax. Whether the new funding system is tied to actual usage or the waybill and fuel taxes are maintained, we don't have a strong preference provided the all-cargo industry is not shouldering a disproportionate cost burden. We should not be asked to accept a more unequal burden on all-cargo operators than the status quo - where we now pay more than 100% of our fair share.

Furthermore, just because we are avid supporters of an updated ATC system, we should not be viewed as a "deep pocket" which might make up system shortfalls created by the unwillingness or alleged inability of other users to pay the costs of much-needed modernization. This would be particularly unfair since the all-cargo industry, which operates at off-peak hours, actually imposes less of a burden on the ATC system than a straight time-in-system or per-flight calculation would reflect.

The FAA has historically received a significant portion of its funding from the general fund. Past FAA bills, and the current one, S. 1300, continues a contribution to the funding of the national ATC network from the general fund. We believe that it is critical for an FAA bill to support nercesssary growth in infrastructure costs. To that end, we want to ensure that S. 1300 especially in the later years, reflects the necessary funding to continue to address system needs. Funding for Fiscal 2009 and 2010 would actually be decreased from Fiscal 2008, which is in turn below historic amounts. The general fund contribution should recognize the value of a well-run air transportation system to the U.S. economy, as well as reflecting public use of that system. We would strongly suggest that this Committee include financing sufficient to increase the general fund contribution, rather than decreasing it, at this critical juncture.

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