Airports Council International-North America
Good morning, and thank you, Steve [Grossman], for that very kind introduction. You know, I’ll be honest. I once had somebody tell me that “broad experience” on a resume is another way of saying “can’t hold a job.” Steve was kind enough to put that a little more diplomatically .
It’s great to be here. This is an exciting time for airports indeed, a time of transition and change for all of aviation. There’s a resurgence going on, one that bodes well for the aviation sector, especially for airports. When you take technology, travel and passengers — a billion by 2015 — well, that’s a recipe for success, certainly a recipe for change.
And that’s something we need to be careful about. I’m reminded of a guy who got hired by a large company. He was brought in to shake things up, get rid of the deadwood, cut the red tape, kick bureaucracy right in the teeth.
So his first order of business was to travel around to see the company’s facilities. Right off the bat, he’s brought to a room where there are 50 senior managers, all sitting in chairs, just waiting to see what the new guy’s got on his mind. So when he walks in the room, he sees a younger fellow just leaning against the wall, kind of slouching, just doing nothing. This is just the chance to demonstrate what the new guy’s got going.
The new manager walks up to the young guy, points a finger, and says, “What do you here?” The younger guy is taken aback, but he says, “Mostly, I just wait around. I’m just standing here. I’m not bothering anybody.”
The new guy says, “How much do you make a week?” “Three hundred dollars,” comes the reply. The new manager pulls out his wallet, peels off 12 one hundred dollar bills, his own money, stuffs it in the guy’s shirt, and says, “Get out of here. And don’t come back.”
Needless to say, the room is shocked, stone cold quiet. The new manager says to the group, “Does anybody want to tell me what that guy’s job was?” From the back of the room, somebody says, “You just fired the pizza delivery guy .”
We all get a chuckle about that, but the point is pretty clear. Before you jump in with both feet, it pays to get the lay of the land — or the airport — first.
That’s what I hope to discuss with you this morning, the lay of the land, how things are from my perspective, and, more importantly I think, where they’re headed .
So let me start with job one — the safety of airports. Let me ask for a show of hands. How many of you have some type of construction going on back home? Look around. Without a doubt the first question that many people would ask is whether or not the projects are on schedule and on or under budget? What’s on my mind, however, is this: Do we have a solid construction safety plan? Does everyone know what the rules are?
Let me be perfectly clear. It’s everyone’s job to maintain the safety of the airfield during construction. If your staff is thinking that safety is someone else’s responsibility, you’ve got a problem. And it’s a problem that needs to be nipped in the bud right then and there.
Just about a month ago, I visited O’Hare to get a first-hand look at what they’ve got under way, the modernization plan. That’s one of the most complex construction projects going on. And I wanted to see it for that very reason. You know, collectively, we’ve got to make sure that safety — especially in the context of airport construction — is kept front and center. Collectively, I think we’re doing that. You can’t lay a foundation for the future unless safety is your first brick. Our Airports office will be getting out guidance soon on Safety Management Systems for airport operators and construction safety will be a perfect application for that new safety tool.
Likewise, you can’t talk about safety without talking about RSAs. Let me say that I’m very pleased with progress we’re making together on runway safety areas. As you know, the FAA began a long-term safety improvement program in 2000 for all runway safety areas that do not meet current standards for commercial runways at airports certificated under Part 139. At the time, it included about a thousand runways at 550 airports across the country.
We’ve followed an aggressive improvement plan for RSAs, and the numbers are looking good. RSAs substantially meeting standards increased from 55 percent in 2000 to more than two-thirds last year. The goal — a goal that’s entirely reachable — calls for all practicable improvements to be completed for about 230 remaining priority runways by the year 2015. More than eight in ten of those improvements will be completed by 2010. The cost to AIP is about $1.4 billion, but that’s money well spent.
Together, we’ve also got a terrific track record on constructing new runways. Since 1999, 12 new runways — more than 20 miles of pavement — have opened at the 35 busiest airports. That gives us capacity to accommodate 1.7 million more annual operations. It’ll also help us decrease the average delay per operation at these airports by about five minutes. The total cost of these runways is $5.2 billion with approximately $1.68 billion in Airport Improvement Program funding.
In addition, six airfield projects, including four new runways, a runway extension, and an airfield reconfiguration, will be commissioned by the Fall of 2008. They will allow us to accommodate almost 300,000 additional annual operations and decrease average delay per operation by another two minutes. The cost of these six airfield projects is approximately $2.4 billion with about $800 million in AIP funding. These are big investments — with big payoffs as well.
Ultimately though, we’re going to need these and more . As noted airport consultant Bob Dylan said: airports … they are a changin’. Specifically, we know from the forecasts that traffic’s on the rise. The National Plan for Integrated Airport Systems shows that capital requirements are increasing. The previous NPIAS had shown a dip of about 15 percent. The current one, which is about to be issued, shows a four percent increase in AIP eligible capital development needs. Fact is, that four percent increase may be low, since it doesn’t reflect cost impacts from fuel and steel prices or Katrina or Rita.
We also know that airports in general have recovered financially. The demand for air travel is back to 2000 levels — I say this knowing that some smaller markets have not rebounded completely. Almost all large and medium hub airports are profitable. They posted net operating results in 2004 that were eight percent higher than in 2002, when the full impacts of 9/11 registered. Small and non-hub airports, which includes commercial service airports, came in 28 percent higher.
And the numbers go up from there. By 2016, the FAA projects that domestic flights in the U.S. will increase by 27 percent over 2005 levels. Passenger traffic between the U.S. and international destinations is expected to grow by 70 percent, and world-wide traffic is projected to increase by as much as 80 percent.
So, largely, the big picture is good news. But it’s clear that airports continue to face financial pressures from many directions. Airlines, which face their own financial challenges, are pushing airports to keep costs and landing fees down. The financial markets want airports to enhance their financial stability and increase their revenues, especially from non-airline sources. The markets continue to prefer airports that are cautious about committing to new development. Yet airports must continue developing their infrastructure to meet current and future demands in the National Airspace System and in the delivery of air transportation services to the public. Also, even with their improved financial performance, small airports still rely heavily on Federal support to meet their development needs.
Bottom line: We, the FAA, need to account for the whole financial picture for airports as we develop our proposals for AIP reauthorization — and we will. We also have heard your desire for more flexibility in how you spend federal funds. We’re looking carefully at how to accomplish that goal. Next year’s reauthorization comes at a critical time, and I firmly believe that we need to be bold in order to meet the needs of the Next Generation Air Transportation System.
Let me now offer a few observations about the state of the FAA, and how it affects you. But I need to spend a moment to tell you how we got where we are.
The first order of the day was direction from Congress, the taxpayer — you — to the FAA and it is some pretty clear language: start to operate more like a bottom-line business. We contracted out our automated flight service stations, saving $2.1 billion over 13 years. We’ve consolidated administrative, staff and support functions to save another $400 million. We’ve tied pay to performance wherever possible, including a new controller contract that saves nearly $2 billion over five years while giving us new managerial flexibility to safely manage the system.
We also created a reliable cost-accounting system and made other reform that led GAO to take us off its “High Risk” list for financial management. In many ways, we’re mirroring the same type of fiscal restraint that you’ve been showing. And that’s the way it should be.
I’m proud of the fact that our major capital programs are nearly meeting the stringent goals we set out in the Flight Plan. We wanted them to come within ten percent of being under budget and on time. And wouldn’t you know, we’re hitting 100 percent for the former and 97 percent for the latter.
Responsible government begins with fiscal responsibility, which is what we’re doing more and more and more.
And with good reason. As you know, the excise taxes that fuel our operating budget are set to expire in the Fall of ‘07. Right now, the formula for the taxes is based on the price of a ticket. As prices rise and fall, so does our income. That makes it difficult to plan for long-term capital investments. I certainly don’t need to talk to this group about the challenges that creates. So with the emergence of low-cost carriers and the change in the fleet mix, our income dips, but our workload goes up. More passengers, more smaller planes, lower ticket prices, lower income. What’s wrong with this picture? And what’s worst of all is that we know that the FAA is trying to handle all of this with a revenue stream that’s in no way related to the actual cost of providing the service. I’ve said in the past that our revenues might as well be tied to the price of a gallon of milk. That one occasionally draws a few chuckles, but I’m not kidding, and the joke is on all of us.
Bottom line: we need a stable revenue stream. The changing face of aviation brings with it the need to modernize and we can’t do that without fundamental reforms of the current financing system. If traffic grows as expected, we project that by 2014 delays in the U.S. will increase 62 percent over 2004 levels. In fact, if the weather is the same in 2014 as it was in 2004, 29 days — almost a month — in 2014 will experience more delay than on the worst day in 2004. These projected delays will cost the airlines at least $2 billion in extra costs and will seriously erode profits needed for future fleet and infrastructure expansions.
The situation is even more perplexing for the passenger. Because of missed connections, passenger delays could conceivably double by 2014. That’s just not acceptable.
So we’re not going to let that happen. We’re addressing the need to modernize with NextGen, the drive to create the next generation air transportation system. I don’t have to tell you about the ramifications for the failure to plan now for what’s coming down the road. A couple of months ago, I picked up the Wall Street Journal and saw four different ads for VLJs in the first nine pages of section one. The need to modernize is upon us, so we better get moving.
I think we all have to be very clear. NextGen isn’t only an air traffic transformation. It’s the integration of air traffic with airport requirement, especially in terms of infrastructure and security. It’s curb to curb. That’s why we have an integrated product team for airports. And that’s why we have an integrated product team for security. All working together under the umbrella of our Joint Program Development Office, which is responsible for designing and launching the next generation system.
In closing, let me point out that as part of our reauthorization exercise, we are looking at whether airports and state aviation officials can play an expanded role in moving to the next generation system. And we are looking at how AIP and PFC investments can be used to assist you to prepare in being part of this important transition.
We’ve asked for your input in the past and we’ll continue to do so. I’ve said on many, many occasions that aviation is a lifeline. The truth of the matter is that airportsare what make that lifeline possible. You’ve done an outstanding job thus far, and as we move forward to modernize, as we lay the groundwork for the future, we’re creating a foundation for success. I, for one, am glad to work shoulder to shoulder with you to make it happen. Thank you.