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Remarks of Carol B. Hallett, ATA President and CEO, to the Aero Club of Washington November 26, 2002

Thank you Shelly for that warm introduction. And a special word of appreciation to Andy Card. And an especially warm salute to Alan Boyd -- congratulations!

It doesn’t seem that long ago that I started working with the airline industry. That was in my Customs Service days. And it seems like just yesterday that I started at ATA. It's fair to say…time flies. Now we can just hope that more people will too!

Well, in preparing for today, I thought about something we have all experienced at one time or another. And that's the "I should have said" moment. You know, it comes to you an hour or two after the fact. Or around 3 a.m. the next morning.

With this being my last speech to the Aero Club, and with my future as a farmhand eagerly anticipated by my husband Jim -- not to mention probably a couple of you too -- I want to leave no "I should have said" moments behind.

So today I'm going to tell you what I really think.

That being said, let's talk about security first.

Clearly, the devastating blow of September 11, 2001, rocked America to its core.

Characteristically, we shook off the blow, and came back stronger than ever. Not simply to protect ourselves, but to forcefully stop future attacks. Our country -- lead by President Bush and his administration, and the Congress -- has risen to the challenge.

We -- the airlines, the airports and the Transportation Security Administration -- are now engaged in the most massive domestic mobilization ever undertaken. Conservatively estimated, we are likely to spend in excess of $10 billion to fully deploy the planned security regime for our aviation system over the FY 02 to 03 period.

Unlike the business community, however, where plans can be made, adjusted and improved quickly, based on newly acquired information and experience...things are quite different when the government is involved.

So, my first "I should have said" moment is in that regard.

The reality is that we ought to let our security experts do what they do best -- establish a smart, effective and efficient security system -- one designed and built in a dynamic process.

Our experts need the resources to do the job; they need our support and commitment, and they need responsible oversight. What they don't need is to implement a design crafted by non-experts in an environment removed from day-to-day realities.

Now I do not say this in criticism of Congress, the Administration or most especially the TSA. All of these institutions have stood up and done an incredible job over the past fourteen months.

But, what we are doing is mechanically deploying a security system built around technology, procedures and dates. Technology, procedures and dates mandated by the Congress over a year ago. Technology, procedures and dates mandated without regard to the technology's capability, the adequacy of the procedures or the nature of the threat. With all due respect, the governmental approach should be tempered by adopting the business model -- to allow adjustments and improvements -- even "fundamental rethinking," based upon real-time information and real-world experience.

The responsible government experts -- TSA in this case -- should be encouraged to ask:

• Does it really make sense to deploy the precise security system established under the Aviation and Transportation Security Act?
• Could we do things better and smarter by relying more on experts and less on a checklist approach?
• Does it make more sense to devote more resources to a selective process for passenger screening? As currently constituted, it's deemed to have failed when the average citizen boards an aircraft with a one-inch Swiss Army knife or a corkscrew.
• Should explosive-detection screening be performed in precisely the same manner on every piece of baggage?
• Could we provide better, more effective and efficient security through means other than those prescribed in the Act?
• And lastly, looking at the broader issue of Homeland Security, the question must be asked: Are the security resources placed in the aviation sector appropriate and optimally effective? Would a broader, society-wide investment pay a higher security dividend?

These questions need to be asked. More importantly, they deserve to be answered. Answered in a deliberate, thoughtful, cool and analytical fashion.

The risk of not doing so raises the prospect of "fighting the last war." A well-intentioned, expensive security regime responding to what happened in the past, as opposed to what might happen in the future, must be questioned.

Now, I want to be absolutely clear. I do not raise these points to criticize the decisions that have been made to date. Congress, the Administration and the TSA have responded to the crisis with dispatch. But the point is that now, with the crisis being managed, it's time for some thoughtful introspection and expert assessment.

And for my second "I should have said" point:

It's time to tell the pseudo-experts on aviation -- particularly aviation security -- that their views are just that -- views. Aviation security policy cannot be set by the vocal views of a few self-proclaimed authorities. The unwillingness to "take on" some of these voices has led to decisions that are not in the public interest.

We must empower security experts – be they in TSA, in Homeland Security or elsewhere in the law enforcement and public-protection communities – to communicate their expert views…to improve the system.

We need to back these experts up against the shrill headlines or the artfully leaked government reports that, too often, have subverted serious policy consideration.

And before you start wondering who I'm talking about…I am not going to get into the naming business. Instead, ask yourself the next time you read a headline about security: Is the source really an expert? Is there a personal agenda involved? Or, is it grandstanding and bombast, rather than substance?

My third point is: Loose lips sink ships!

We need to get serious about keeping quiet regarding security processes and procedures. What goes on today is nothing short of shameful! Public discussion in Congress of how, when and where baggage is to be checked for explosives…Detailed articles appearing in the press reflecting confidential information about how a passenger "profiling" system might work…

It's shocking!

How can we be serious about building deterrence and detection? How can we eliminate the threat of terrorism while publicly airing the most sensitive and specific details of those systems?

And, believe me, the irresponsible parties are not just in government. The airline industry has been the source of far too many detailed "leaks" as well.

Let me be clear.

President Bush has indicated repeatedly that we are engaged in a deadly serious war against an enemy of our very way of life. That enemy has used the openness of our society as a weapon against us.

They're smart. They're determined to do more harm in the future!

And, in this context it is unacceptable…No -- it is unbelievable -- that we continue to dissect our aviation security program in public.

We need to be as unflinchingly serious and circumspect about aviation security as we are about national security.

Congressional hearings touching on any details about the workings of the program must be closed. Reports by the DOT Inspector General, the GAO or anyone on the workings of the security system must be classified and tightly held. Leaks of information must be dealt with forcefully.

And government employees, as well as industry employees, from top to bottom, must be sanctioned for security breaches -- including disclosure of program details.

If we're truly serious about improving security, we must tell the media – with all due respect – that we will not compromise our security system with disclosures.

Please don't get me wrong. The public has every right to know the general parameters of the security system. But the public also has every right to expect that we will not provide a road map for those intending to do us harm. Remember, loose lips sink ships.

As for my fourth "I should have said" point:

I have previously stated this publicly. But in the interest of clarity, let me reiterate. We need to change the way government finances aviation security.

The idea that travelers and shippers should pay "user fees" to have themselves protected from terrorism is outrageous!

We don't charge a security fee to protect our citizens from terrorists when they ride a subway. And we're not charged a security fee when we visit a museum. People visiting government facilities don't pay a security fee for protection from terrorists.

The government should allocate the appropriate resources to defend all of us from these threats of terrorism -- no matter where we are or what we are doing.

The attacks on the United States on 9/11, were just that: attacks on the United States and all that it stands for. The instruments of the attacks may have been hijacked aircraft, but the purpose and effect was no different than an attack on the United States by hostile foreign forces.

Defending against such attacks…Defending against foreign aggression…Providing for our common defense…are, without question, the responsibilities of the United States government.

Why do I say this?

I say this because international terrorists, intent upon attacking the United States have, for decades, selected our airlines as their surrogate targets and held passengers as their hostages.

While the aviation industry has worked cooperatively with the government to counteract this threat, it is fundamentally only government that has the tools to combat the threat.

It's the government -- and only the government -- that can counteract terrorism through diplomacy, economic sanctions, intelligence gathering, covert action, military action and law enforcement.

Where the airlines can help in the battle is with countermeasures.

But, government's continued reliance on airline-provided countermeasures -- which I remind you take place after the previous six steps have failed -- is wreaking havoc with the airline industry. It has wreaked havoc for the entire aviation sector.

And, it threatens first our national transportation network, and ultimately, the stability of our national economy. It is past time for emergency corrective action.

As a consequence of the softened economy, the airline industry was in poor economic condition prior to the 9/11 attacks. However, the industry was positioned to withstand these normal economic downdrafts -- and to withstand them to a much greater degree than during earlier periods of slow growth.

But the industry's economic meltdown since 9/11 is without precedent. And it traces its roots, in substantial measure, to post-9/11 government policy decisions.

Just look at the estimated industry pre-tax losses for 2002. They're estimated to total $9 billion. And it appears that almost $6.3 billion arise -- one way or another -- from the events of 9/11.

These massive and mounting losses demonstrably reveal the absence of pricing power within the airline industry. And, with the absence of pricing power, lies the fallacy of assumptions that customers absorb additional security fees and costs.

They do not!

As a consequence, the always-delicate economic balance of the airline industry has been destroyed. Airlines have been forced to borrow on a massive scale just to fund continuing operations. The nine largest passenger airlines now carry over $100 billion in on-balance-sheet debt. But, they have a total market capitalization of only $15 billion.

The consequences of this meltdown are grave.

As the industry continues to contract, smaller and mid-size communities will be disconnected from the national air transportation system -- a system vital to their economic health. Manufacturers and aviation suppliers and, ultimately, a major element of the nine percent of the Gross Domestic Product that is driven by civil aviation, will be seriously diminished. Hundreds of thousands of jobs have already been lost.

And those job losses will reverberate with even more destructive consequences. The threat to the broader economy is very real. And it is very immediate.

If we are to avoid devastation from the continuing meltdown of the airlines…corrective and decisive action must be undertaken now:

• First, the industry must continue to eliminate unnecessary costs -- and it is doing so. It must deal aggressively with a vast array of critical business issues -- issues that only the industry and its individual companies can resolve. And only the industry should be expected to resolve.
• o Second, but just as importantly, the United States government must assume the full cost and responsibility for assuring protection of the aviation system against terrorist attacks. At the same time, however, the government must not erect barriers to public access to the system. Because doing so will only discourage air travel. Also the government must reject the false premise that the airlines and their customers can or should bear this national defense burden…

So…for my last "I should have said"?

Please do not take my comments lightly. They're not random thoughts.

I firmly believe that if appropriate action is not taken, draconian steps will be necessary.

So, I'll say it:

Failure to fix the root causes of the airline industry's meltdown may necessitate nationalization of the industry.

And, whether I am a farm hand in Virginia or the President of the ATA, the cost of that step is intolerable.

Yes, it is intolerable…for we will have failed. We will have failed to sustain a system that constitutes forty percent of the world's commercial aviation system. We will have failed to sustain a system that underpins twenty-five percent of the world's economy.

And with that failure, the question has to be asked…"What will it mean for our country's economic vitality and potential?"

Let me reiterate the points that I want to drive home with you:

• Let the true security experts design the program and build the process.
• Don't let the pseudo-experts -- the self-proclaimed authorities -- set aviation security policy.
• Loose lips sink ships -- don't give a roadmap to the terrorists.
• The U.S. government must allocate appropriate resources to protect America's aviation system from terrorist attacks.
• This appropriate action by the U.S. government is crucial if we are to avoid nationalization.

Ladies and gentlemen, there will, no doubt, be some "I should have saids" that I've forgotten…but I'll get back to you at 3 a.m!

Thank you.