Chairman Istook, Congressman Olver, Members of the Subcommittee:  Thank you for the opportunity to appear before you today to discuss the Federal Aviation Administration (FAA) and our budget request for fiscal year 2004.  Before we begin, I would like to acknowledge the new Chairman of this Subcommittee, Congressman Istook, from the great state of Oklahoma.  I look forward to working closely with you as well as the other Members of this Subcommittee during my tenure as FAA Administrator.   I would also like to recognize Kenneth Mead, Inspector General for the Department of Transportation.  Thank you, Ken, for your commitment to work jointly with us to tackle our most pressing financial and performance challenges.

In the seven months I have served as Administrator, I have had the privilege to lead an agency whose mission is second to none--ensuring the safety of our Nation’s aviation system.  Our mission is carried out by thousands of talented, energetic, and dedicated employees who care about the safety of the American people.  I thank them for their dedication.  I would also like to recognize Secretary Mineta for his exemplary leadership.  His vision of an agency that is Safer, Simpler, and Smarter is the foundation that we are building from.  It is an honor to represent him today.

We at the FAA operate and maintain the Nation’s complex air traffic control system, including the facilities and equipment that enable its operation.  We  control and monitor more than half of the world’s air traffic--up to 5,000 aircraft in U.S. airspace at any given moment.  FAA conducts state-of-the art research to continually improve safety and efficiency.  We help improve the safety and capacity of more than 5,000 public-use airports in the United States.  Our inspectors oversee more than 7,000 operators, including 139 air carriers.  Our maintenance technicians perform the maintenance, repair and engineering of over 62,000 facilities and pieces of equipment.

A More Business-Like FAA

Let me begin by discussing an issue that concerns us all--the need to improve the way we manage resources at the FAA, especially our operating costs.  This has been a long-term challenge, and one that I am focusing on. 

When it comes to costs, we must manage future growth through informed decisions.  Just as our safety decisions should be driven by data, so should our management decisions.  Consequently, we must accelerate our efforts to set up our new financial system, DELPHI, and finish implementing our Cost Accounting System (CAS) and Labor Distribution Reporting (LDR) initiative.  We must then use these tools to drive analysis and make better decisions.

During my tenure, the FAA will improve its cost accounting and acquisition processes.  Currently, FAA has implemented cost accounting in two lines of business and several support organizations.  And while we track 80 percent of our costs monthly, we still have much work to do.  We have to use our financial data to truly manage our costs.  We use our financial data  to identify cost anomalies across facilities, and benchmark our performance against the European and other air traffic systems.  That is where the real work lies.

FAA received another unqualified or “clean” audit opinion on our FY 2002 Consolidated Financial Systems.  I am proud to say that this is the second year in a row that the Agency has received such an opinion.  This gives us the firm foundation that we need to implement DELPHI effectively and to continue to build our cost accounting system.

As part of our cost accounting system, we are implementing a labor distribution system in air traffic services called Cru-X to account for and distribute labor costs.  Our air traffic controller workforce will use this data to better assess their workload and performance.  Recently, the Inspector General noted that we have additional work to do on internal controls related to this system.  I am committed to making necessary changes, and to assuring the integrity of our cost information. 

The Agency has worked hard to implement a performance-based pay system, but we still have much more to do.  Approximately 36 percent of our employees are currently under the system--a system that links organizational goals with individual performance goals at every level.  We must fully embrace a new way of thinking-- pay for performance. 

And yes, we must address the large number of memoranda of understanding (MOUs) between Agency management and its unions. The Inspector General has provided critical leadership on this issue.  There are approximately 1,500 of these side-bar agreements between our unions and the Agency.  Let me say that most of these MOUs are valid, but some are not.  To address the problem, the FAA established an internal management team, consisting of representatives from the Offices of Air Traffic, Labor Relations, and Budget, to compile and review over one thousand local, regional, and national MOUs.  We sent a list of MOUs to the National Air Traffic Controllers Association (NATCA) with a request to modify or eliminate problematic provisions as a condition of our tentative agreement to extend the 1998 contract.  More immediately, the FAA is implementing  new procedures consistent with the Inspector General’s recommendations to provide better oversight of MOUs in development.

We are also tackling our high worker’s compensation costs by initiating a pilot program covering the Southern Region and Headquarters, where we have our largest caseloads.  The goal of these efforts is to get employees back to work, and at the same time reduce our caseload and costs.

All of these efforts come together to make the FAA more business-like, more accountable, and more efficient.

Budget

Let me now turn my attention to the 2004 President’s Budget.  Our budget supports the Administration’s reauthorization proposal, known as Flight –100, by supporting our efforts to be Safer, Simpler, and Smarter.

To support our operations and capital investments, the President has proposed a FY 2004 budget of $14 billion.  Specifically, his budget requests $7.6 billion for operations, $2.9 billion for facilities and equipment, $3.4 billion for airport grants, and $100 million for research and development.

This represents a 3.7 percent increase from the 2003 enacted budget.  Funding will support 49,748 employees. 

For Operations, the Administration is proposing a 7.4 per cent increase after netting out the return of internal security activities that were temporarily transferred to TSA in FY 2003.  Certainly, a generous increase given the current environment.   More than half of it covers the standard pay and inflation increases the President is proposing for all agencies.  About a third of the requested increase provides a temporary bridge to a new telecommunications contract and the cost of bringing new equipment into the system--equipment that is purchased with Facilities and Equipment dollars, but maintained in the Operations account.  The balance, equal to about five percent of the increase, will allow the FAA to hire more controllers to prepare for an expected surge in retirements and expand several important safety initiatives.

Your support for these investments will help reap benefits for years to come, as FAA provides a safe and efficient aviation system that contributes to national security, promotes economic growth, and encourages the recovery of civil aviation.

SafetyLet me address my top priority, and that of every FAA employee--safety.  Under the leadership of Secretary Mineta, the Department’s emphasis on safety has never been greater.  The United States has a remarkable safety record.  Almost 100 years after the Wright Brothers first took to the skies, FAA is proud to report that CY 2002 was one of the safest years in the history of the U.S. airlines, not a single fatality on a U.S. commercial airline.  We are proud of this achievement, but we will not rest on our laurels. 

Safety must always be our top priority, especially with the airline industry in serious economic trouble.  As a carrier reduces its schedule, its fleet, and its personnel, we must evaluate the impacts of these reductions and amend our  surveillance plans as necessary.  I recently met with the FAA managers overseeing US Airways and United Airlines to ensure that we have appropriately expanded our review of these carriers.  And we are focusing our safety oversight on areas that may be more at risk during a financial crisis.

We will support the resurgence of the airline industry with some of our most effective mechanisms--continuing our investments in building capacity at our Nation’s airports and putting safety first. 

Our budget request reflects our emphasis on safety.  Out of a total budget request of $14 billion, $8.7 billion will be used to support FAA safety goals.  Full funding of the President’s Budget will provide needed funds for inspecting aircraft, expanding safety programs and hiring an additional 20 safety staff, operating and maintaining the air traffic control system, hiring 302 additional air traffic controllers (to anticipate the first wave of controller retirements), returning the Hazardous Materials Program to FAA from TSA, purchasing airport surface movement detection equipment, conducting research on aviation safety, and making additional AIP grants for airport safety, capacity and security investments.

In commercial aviation safety, several programs and initiatives were instrumental in reaching last year’s high level of aviation safety.  The Runway Safety Program helped reduce the number of high-risk runway incursions significantly, which in turn lessened the risk of collisions.  Runway incursions declined from 407 in FY 2001 to 339 in FY 2002 due to our aggressive actions to reduce these incidents, and the number of high- risk incursions fell from 53 in FY 2001 to 37.  The Airport Movement Area Safety System (AMASS), now operating at 31 major airports, has been officially credited with saves at San Francisco, Boston, and Detroit.

Our Safer Skies initiative, a joint government and industry effort to reduce commercial fatal accidents by 80 percent by 2007, made significant progress in addressing several factors that cause air carrier accidents.  I am pleased to say that we are on track to achieve this goal.

The Air Transportation Oversight System (ATOS) is another tool to increase air travel safety and, like Safer Skies, is targeted for increased funding in the President’s Budget.  Under ATOS, in addition to comparing carriers’ performance to all the requirements of our regulations, aviation safety inspectors evaluate air carrier systems that affect safety.  Using ATOS, we have identified weaknesses in air carrier programs and made sure the carrier took corrective actions to prevent accidents.

The TWA Flight 800 tragedy focused national attention on the critical need to improve fuel tank safety.  For years, the NTSB and others have been calling for a way to remove flammable oxygen from fuel tanks and substituting inert gas, but the designs have been deemed too heavy, complicated, and expensive.  The good news I have is that FAA researchers developed a relatively simple but effective way to generate nitrogen-enriched air in flight.  It is very simple.  It has no moving parts and even at full scale it weighs less than a single passenger.  We will flight test this system in the next few months.  And, if all goes as expected, we will take another major step forward for safety.

We are placing major emphasis on strengthening our international safety focus.  We are working with the International Civil Aviation Organization (ICAO), as well as other members of the international aviation community, to strengthen and further aviation safety.  For example, ICAO and the Joint Aviation Authorities are both involved in the Commercial Aviation Safety Team (CAST), the commercial aviation side of Safer Skies.  FAA also introduced the Global Aviation Information Network (GAIN), a program that promotes the global collection and sharing of safety information.

Capacity Building

While safety remains our first concern, we must also remain committed to expanding capacity throughout the aviation system—in the air and on the ground.  While demand for passenger travel is down, it will return.  The FAA must be ready for this recovery.  Now is the time to focus on increasing airport capacity, while demand is temporarily reduced.  Both the President’s Executive Order on environmental streamlining and the $3.4 billion investment included in the budget for the AIP program demonstrate the Administration’s commitment to expanding capacity.  With this level of funding, coupled with some structural changes in AIP formulas, the Administration will be able to better target projects of national significance that provide the greatest system benefit and, at the same time, provide additional funding to airports that rely most on Federal assistance. 

Even after September 11, FAA’s Operational Evolution Plan (OEP) remains fundamentally sound--with a planned 31 percent increase in capacity by 2010.  In response to the costly, frustrating, and unacceptable delays that plagued the system in the summers of 1999 and 2000, FAA made needed changes, such as identifying and addressing choke points in the system and developing and refining regular communications between the airlines and the FAA Command Center to deal with daily problems.

The User Request Evaluation Tool (URET) allows controllers to approve more direct routes and is saving airlines time and fuel.  With this tool, everyone wins.  We’re also seeing significant results from the Traffic Management Adviser (TMA), which makes more efficient use of our busiest airports.

Although we have other initiatives ongoing, new runways added at the right airports are the single most effective way to increase capacity.  Thus, FAA’s OEP tracks 12 runways scheduled for completion in the next 10 years.  During calendar year 2003, we expect Denver, Houston, Miami, and Orlando airports to complete runway projects.

Let me be clear--investing in airport infrastructure alleviates a congestion problem at a specific location, as well as provides relief to the entire air system.  You may have seen previous studies we performed that show how delays at one airport (LaGuardia) ripple across the entire system.  The system is highly interconnected, which makes our long-term strategic planning even more imperative.

The economy relies on aviation to move people and products, and aviation relies on an efficient NAS to accommodate the capacity demands placed on it.  We must all work together--Congress, federal, state and local governments, and industry stakeholders--to ensure that the future does not catch us unprepared for the return of air traffic to pre-September 11 levels and higher.  Future generations depend upon us.

Security

Since the events of September 11, the focus of Congress and the American people has been on security, and understandably so.  You and your colleagues should be applauded, along with TSA, on your joint efforts to improve aviation security.  By federalizing baggage screeners, ensuring that checked baggage is screened, and expanding the federal air marshal program, your efforts have made air travel much more secure.

The FAA has played an important role by providing resources and successfully transitioning our former security programs to TSA.  And we continue to work closely with TSA to assure that our safety programs are interrelated and coordinated with their security programs--without redundancy and complications.  We look forward to the healthy continuation of our partnership to restore the faith of the American people in aviation.

The FAA still retains security responsibilities for the aircraft and flight crew.

In fact, today is the deadline for airlines to have cockpit doors fortified.

The President’s Budget requests $198 million to secure FAA facilities and electronic systems.  This includes $145 million in Operations to fund internal FAA security, including securing our many information systems and conducting background checks of staff.  Internal security is not a new activity, but was temporarily transferred to TSA in the FY 2003 budget.  Fully funding the President’s Budget request would also provide 26 new controllers to support the North American Air Defense command and its expanded airspace security programs.

Conclusion

I believe that we are moving steadily towards a Safer, Simpler, Smarter and more business-like FAA.  Our program innovations coupled with a strong emphasis on better cost accounting and financial accountability are leading us in the right direction.

To ensure that FAA moves forward in all these areas, one of my top priorities is to provide consistency and predictability in the way FAA works with industry.  I do not want any variations in FAA policy or practice in the regions or field offices.  I want our industry partners in the United States and  around the world to know what they can expect and count on when dealing with FAA.  The future of aviation is dependent upon all of us leveraging our reduced resources to support the common goal:  a safe and efficient aviation system for our children and generations to follow.

This year marks the centennial of the Wright Brothers’ historic flight at Kitty Hawk.  When you look back on those early days of aviation and compare how dangerous air travel was to its safety record of today, it is easy to congratulate ourselves and feel content with how far we’ve come.  Yet, our pride should not give way to complacency.  We must continue to set and work to achieve higher goals on safety, capacity, and efficiency.  Although we will face countless obstacles and difficult decisions, we must draw on the strength and courage of great aviation pioneers, such as Lindbergh and Earhart, who set difficult goals and attained them.  I am proud to take part in the future of aviation, and I stand ready to work with you, as together we chart the next century of flight.  Thank you.

This concludes my prepared statement.  I am happy to answer your questions at this time.