Why Change is Needed

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Aviation is critical to the nation's economic well-being

• A stable and dependable air transportation system is vital to the U.S. economy. Independent economic studies have estimated that if indirect and secondary impacts are included (such as visitor expenditures and other economic activity generated by aviation) the industry contributes $640 billion to the U.S. economy—or 5.4% of U.S. GDP—and over 9 million jobs.
• Aerospace employs over 475,000 Americans across the country (including nearly 400,000 in aircraft and aircraft parts). Net aerospace exports totaled over $36 billion in 2005; aerospace is the third largest U.S. export category and one of the few in which we have a trade surplus.
• Our aviation system enables economic growth and provides a better quality of life for Americans. Since deregulation, ticket prices have declined dramatically and provided new access to air travel for thousands of people.
• Air travel continues to be the safest form of transportation, by far, and we are enjoying one of the safest periods in aviation history. Between 2002 and 2006, U.S. scheduled air carriers have transported over 3 billion passengers, or ten times the population of our country. Over that time frame there have been fewer than 100 passenger fatalities. The three-year fatal accident rate is 0.023 per 100,000 flight departures.

The existing air transportation infrastructure is not scalable to accommodate future demand

• Many more people travel by air today than was the case only a decade ago. And they travel more often. In 2005, 738 million passengers flew on U.S. commercial carriers, compared with 579 million in 1995 and 395 million in 1985. We expect this figure to reach 1 billion passengers by 2015—less than a decade from now.
• There were 13 million commercial flights in 2005, compared with 11.9 million in 1995 and 9.1 million in 1985. FAA forecasts this number to grow to 15 million by 2015.
• And the wild card is what does the future hold for very light jets. FAA forecasts 4,050 in service by 2015, and there are other forecasts that are much higher.
• The bottom line is that we need to be ready to accommodate increased demand before the increase occurs. This is because the existing air traffic system is reaching the limits of its potential for growth. Quick fixes using the existing system, such as adding more radars and controllers, will not produce the required additional capacity.
• Instead, we need to increase capacity by transforming the system, and we cannot wait.
• FAA is working through the Joint Planning and Development Office with other government agencies to design the Next Generation Air Transportation System, or NextGen, to meet expected demand for air transportation services.
• NextGen will transform the aviation system from relying on ground-based navigation to one that uses new technologies, such as global positioning systems (GPS) and Automatic Dependent Surveillance-Broadcast (ADS-B).
• By embracing this transformational change we can ensure the aviation system of the future can enhance U.S. competitiveness in a dynamic and rapidly evolving global trading system.

Why we need to change the way we fund FAA

• To implement this change we need to meet the capital requirements of NextGen, and this depends on a more stable and reliable funding structure.
• The funding authorizations for FAA’s current program authority and the existing taxes that fund the Airport and Airway Trust Fund (Trust Fund) both expire at the end of FY 2007. If there is a lapse in collections in 2007, the Trust Fund balance will not go very far. The uncommitted balance of $1.9 billion (at the end of fiscal year 2005) would only be sufficient to cover about two months of Trust Fund appropriations. Therefore, it is critical that a new revenue structure be in place before the existing taxes expire.
• The current tax structure is not aligned with FAA’s service costs. Factors like falling ticket prices can dramatically decrease revenue while costs remain unchanged. Despite cost control measures, there is a distinct risk of an increasing gap between revenues and FAA costs, given the present and uncertain future state of the aviation industry.
• Under the current tax system, year-by-year funding uncertainties can constrain the ability to manage long-term capital projects effectively and thus slow the pace of system transformation. This can lead to increased congestion and, eventually, constraints on the U.S. economy. The right financing reforms can help us implement NextGen efficiently and on schedule—enabling our aviation system to accommodate expected growth in passengers and cargo.
• We are facing a major transition effort from our existing system to the NextGen over the next two decades. Given the promise of more efficiency and capacity, while maintaining the highest levels of safety, all user groups strongly support the move toward NextGen. Now we need to reach an agreement on a reliable funding source to pay for it.
• The expiration of aviation taxes in September 2007 presents a unique opportunity to reform our funding mechanisms to enable system transformation through long-term Trust Fund viability.
• Clearly, stakeholders have strong and different views on how to finance FAA. We continue to work on building a consensus among aviation stakeholders on a financing reform package that will support the NextGen.
• We have fundamentally reexamined the taxes and general fund contributions that support our aviation system with the goal of making the financing more stable, fair, and transparent. Our financing reforms will lay the groundwork for modernization—bringing our aviation system into the 21st century.
• We want to align what users pay with the costs they impose.
  • Every cost allocation study FAA has done over the last three decades has found that general aviation is responsible for at least 11% of air traffic costs. Notably, they currently pay roughly 3% of the taxes that go into the Trust Fund.
  • FAA conducted a comprehensive Cost Allocation Study to correlate the air traffic system costs with the user requirements and behaviors that drive those costs.
  • The findings of the latest study are in line with those of the earlier studies. Moreover, improvements in FAA’s accounting systems and data collection FAA have given FAA a high degree of confidence in the accuracy of the study.
• One thing all of the stakeholders agree on is the need for a strong general fund contribution. We agree that safety and certain services, such as use of the national airspace system by public use aircraft and air ambulances, should be paid for by the general fund.

We are changing the way FAA does business

• Even as we have been developing our proposals for funding FAA, we have been working on legislative proposals to reauthorize FAA's programmatic functions and responsibilities.
• We have designed our programmatic proposals to improve our efficiency and responsiveness to aviation stakeholders. For example, the legislation will:
  • Give airports more flexibility;
  • Enhance the role of the Joint Planning and Development Office, which is responsible for developing interagency consensus on NextGen planning and implementation;
  • Address the need to rationalize FAA facilities to improve efficiency and save money;
  • Address structural congestion issues;
  • Enhance FAA's ability to provide air traffic services to other countries.
• With this legislation, FAA will continue to build on significant progress that we have already achieved in improving our business processes through tools such as the FAA Flight Plan.