Good morning.  My name is Steve Alterman and I am the President of the Cargo Airline Association, the nationwide organization representing the interests of the all-cargo air carrier industry, as well as other businesses and entities with a stake in the air cargo supply chain.  (A list of current members is attached).

 

            Although an integral part of the air transportation community, the all-cargo segment is unique, with operating characteristics different from other segments, resulting in substantially different air transportation system use and relatively less stress on system resources.  Since our only mission is to provide our worldwide customers and shippers with end-to-end transportation services, a large percentage of our flights are during nighttime hours, thus allowing us to meet time-definite demands and to offer expedited delivery throughout the nation and the world.[1]  We currently pay for slightly over 100% of our share of air traffic system use through a combination of a 6.25% air waybill tax and 4.3 cents per gallon fuel tax.[2] 

 

            The air cargo industry is one of the fastest growing segments of our commercial aviation marketplace, with growth rates of 3.1% domestically and 6.3% internationally expected over the next decade.[3]  In order to continue to provide the time-definite service that our shippers and the world economy demand, we are dependent on a modern air traffic management system that provides the flexibility for growth in the coming years.  We simply cannot afford to continue to manage traffic with technology (radar) designed in the first instance to fight World War II.  Rather, we must build a system using the technology and procedures necessary to address the shortfalls in capacity that will occur as future demand continues to grow. The modernization of our current system must therefore be the major priority in the ongoing FAA Reauthorization effort.   

 

Modernization of the system is critical for reasons other than simply addressing future capacity.  Operational procedures using satellite-based technology will yield more efficient operations, resulting in less noise and less fuel burn, thereby reducing aircraft engine emissions.  These environmental benefits cannot be overlooked.  Nor can the potential safety enhancements that will result with the provision of better and more timely information to both pilots and controllers.

 

Since air cargo is expected to continue to be a major growth element in this system, we have a significant stake in the modernization effort now underway.  We strongly believe the effort to modernize must not be delayed and Congress needs to move this year to ensure that the programs fundamental to a modernized system are both authorized and funded.

 

            The Reauthorization Debate

            On February 14, 2007, the FAA released its long-awaited legislative plan for dealing with both the programmatic and financing elements of the Next Generation System.  Unfortunately, this proposal provides more questions than answers, and the Cargo Airline Association cannot support the FAA proposal in its present form. 

 

While the FAA has, over the past few months, made significant strides toward modernization (especially in the area of making the decision to use ADS-B technology as the next generation surveillance tool), we are concerned that the proposed legislation does not contain a comprehensive Next Generation plan.  Until the details of this plan are known, it is difficult to assess the funding required.  Yet the FAA proposal focuses almost exclusively on the financing element and not on the details of the system.  To some extent, therefore, we are putting the cart before the horse and need to step back to ensure that the right questions are being asked.

 

These questions revolve around the precise nature and associated costs of the Next Generation system, what cost savings the FAA would realize from this modernization, the costs and benefits to the user community and whether the modernized system should be purchased or leased.  Only after these issues are, at least preliminarily, addressed should there be a debate over how to fund the system, including whether the current system is adequate or whether a different system is necessary or appropriate. 

 

When funding questions are addressed, we believe the following principles and considerations should be paramount.

 

  First, the U.S. aviation system is a national asset that benefits all citizens and drives the nation’s economy.  The consequences of a sub-par system are constrained economic growth and diminished U.S. competitiveness in the world marketplace.  Congress has historically recognized these facts by providing a General Fund contribution in excess of 20% of the FAA Budget.  We are disappointed that the President’s Budget and the FAA legislative proposal not only provide a smaller percentage of General Fund contribution for Fiscal 2008, but actually envision a decrease in funding for 2009 and 2010.  With the need for significant infrastructure investments in the coming years, this federal contribution should increase, not decrease.

 

Second, whatever funding mechanism is ultimately decided upon, Congress should ensure that industry funding obligations are fairly allocated.  As a basic principle, no industry segment should be forced to subsidize any other segment.  From the all-cargo perspective, where under the current system cargo industry members pay a 6.25% air waybill tax plus a 4.3 cent per gallon fuel tax, studies indicate that our industry segment pays somewhat more than 100% of our system use.  This is before taking into account that much of our use of the system is at off-peak times – meaning that not only do we place a relatively low burden on the system but , by spreading operations over 24 hours, we also enhance the system’s overall efficiency.  While we do not expect any relief for that portion of our system use that exceeds 100%, neither should we be expected to pay any more than our current share in order to make up for the shortfall in contributions from other industry segments. This equitable result can be accomplished by simply retaining the current funding mechanism for the air transportation of cargo or by ensuring that any new system applicable to us does not unfairly impact our industry segment.

 

Third, we strongly believe that Congress should support the funding necessary for Research and Development in an amount adequate to develop the necessary “out-year” modernization products.  As a practical matter, today’s R&D provides tomorrow’s Facilities and Equipment, and any funding gaps in this area will seriously impede the modernization effort.  This issue is of special concern in light of the re-prioritization of NASA R&D funding to concentrate on future space travel and “de-prioritize” short and mid-term aeronautics research.  A specific area of R&D concern is the research necessary to address growing environmental concerns. 

 

Finally, and perhaps most importantly, we have serious concerns with the specific user fee proposal set forth in the FAA’s February 14 proposal.    Even if it is determined that the current excise tax system must be completely overhauled, we cannot support a new structure that gives the FAA Administrator virtually unfettered authority to set the level and structure of fees at will, with little or no Congressional oversight and no provisions for judicial review.  While the proposed Bill does list use-related factors that the Administrator might take into consideration in setting user fees, all of these elements are discretionary and need not be used.  Such authority would clearly eliminate any incentive for the FAA to cut costs[4] or restrain future cost increases since fees could always be raised to cover unnecessary agency spending.

 

Moreover, it appears that the user fee system envisioned by the FAA proposal will require a complicated and costly bureaucracy simply to assess and collect the fees.  The added costs of establishing and maintaining this bureaucracy cannot be justified, especially when other, simpler, options may be available.  At the least, these other options should be explored before committing to any proposed user fee scheme.

 

The Cargo Airline Association and its member companies are committed to working with Congress, the FAA and colleagues in the aviation community to arrive at an equitable system that meets the needs of all aviation interests.  While the proposed FAA Bill is a useful beginning of the debate, it must not be viewed as a viable final product.

 

Thank you very much.