A Business View of the Myths and
Realities Around FAA Funding
Delivered by
Chairman, President and Chief Executive Officer
Cessna Aircraft Company
Good afternoon. And thank you
for inviting me to join you today.
It is always a pleasure to
talk with people who understand how vital aviation is to the national interest,
and I appreciate your warm welcome.
Over the next 20 minutes, I
will be wearing two hats. I am going to begin as Cessna’s Chairman, President,
and CEO, and finish as the Chairman of the General Aviation Manufacturers
Association.
So let us start with Cessna.
Our company’s founder, Clyde Cessna, was inspired to start his own aviation
business when he saw an air show a few years after the Wright Brothers’ first
flight.
He survived 11 crashes as he
taught himself how to fly. But he would not quit, and eventually, he succeeded.
And then he built upon each successive triumph.
We have helped pioneer
developments in aircraft technologies that have taken us from radial to piston
engines and have blasted us into the jet age.
And Cessna’s contribution to
these advances has helped us earn our reputation as the world’s leading general
aviation company.
Our reputation for leadership
is further reflected in two key facts: first, more than half the people in the
And second – half of all the
general aviation airplanes in the world today are Cessnas.
Our company has not only
built – but also is committed to sustaining – a legacy of aviation leadership.
Two of my predecessors were
instrumental in advancing our reputation and legacy – Dwane Wallace and Russ
Meyer. They set high standards that I am committed to living up to as the
company’s fourth Chairman. As I humbly continue the traditions of those who led
Cessna before me, I am faced with a central challenge: How to inspire this great company, a proven
leader that has met every challenge, and keep it vibrant and forward-looking –
the leader in aviation’s future.
And although I am a
businessman and not a policymaker, the challenges we face at Cessna seem
similar to the ones many of you in this room are addressing – to preserve
aviation’s as the industry heads into its second century.
Consider these
parallels: First, I mentioned Cessna’s
strong legacy. Similarly,
Second, I mentioned the need
for Cessna to prepare for future challenges. In the same vein, the work now
beginning on FAA reauthorization must focus on preparing the nation’s air
transportation system to serve us well into the future.
As I said, I am a
businessman, not a policymaker. But since our challenges have much in common,
and since FAA officials often speak of the need to run the aviation system more
like a business, I am going to offer another approach.
The same kinds of questions I
ask at Cessna are those we need to ask about future needs and funding for the
FAA.
“Where does our aviation
system stand today?
“Where is the market headed?
“What are the requirements we
will have to meet?”
Instead of answers to these
basic questions, all we’re hearing right now are unsupported statements that
amount to little more than myths.
Unfortunately, these myths
have crept into the public discussion about FAA funding and they have gained
undeserved credibility.
My goal today is to debunk
these myths and replace them with some business realities that need to
influence the public debate.
To do that, I am going to
examine five myths about FAA reauthorization, and then I am going to outline
the business principles that can guide us to real, results-oriented funding
solutions for the future of the aviation system.
Myth number one: The mechanisms for funding the FAA
are broken
Some who support changes in
the FAA’s funding mechanisms contend that the Agency lacks a stable and predictable funding
stream.
I disagree.
As a businessperson, I think
we have to look at history, and ask a simple question: Has the FAA’s funding
been stable and are its revenue levels predictable?
The answer to the first part
of the question is yes; historical funding for the FAA has always been stable
and predictable.
The truth is, the steadiness
of the FAA’s funding stream over the past decade has been nothing short of
remarkable.
At no point in the last 10
years has FAA funding declined.
Tech bubbles have burst,
terrorists have attacked, wars have been fought, general aviation deliveries
have dropped – I could go on.
It has been a very turbulent
decade. Yet through it all, Congress has ensured that FAA funding levels
remained stable or even increased.
Some counter this view by
saying funding stability will not be the case going forward as they point to
the President’s proposed budget, which spells out cuts for FAA funding.
I say actions – history –
speak louder than words: Just look at history.
Presidents of both parties
have routinely proposed cuts to FAA funding over the years.
Yet Congress has consistently
preserved, and even increased FAA funding levels. Just last year, the Senate
and House of Representatives passed a Transportation Appropriations bill that
raised the FAA General Fund contribution to 25 percent of the Agency’s total
funding.
That more than doubled the
President’s budget request! And this was done without any significant lobbying
effort.
So, the reality is the
current funding system is not “broken.”
Of course, now that this
reality is being rediscovered, some supporters are admitting there really is
not a funding crisis and are attempting to reframe the debate by suggesting
other reasons for a change in the FAA’s funding mechanisms.
Myth number two:
A funding overhaul is needed to pay for modernization, and to cover
revenue shortfalls from the declining commercial ticket tax
You probably noticed that
this myth is actually two arguments bundled together, so let me dissect them
one at a time.
The first is that a funding
overhaul is needed so the FAA can invest in technology-based capacity
improvements to modernize the system.
Let me shine a business light
on this logic and ask how would a business evaluate future capital investment
needs?
We would conduct studies to
determine where the markets are going, what are the must-haves, what are the
nice-to-haves, and so forth to meet those challenges.
Once we had finished sizing
the needs – only then would we consider the best ways to provide the funding.
What expenditures can be
reduced?
What new revenue sources can we
tap or develop?
In the FAA funding
discussion, it appears these questions either do not matter – or do not matter
enough.
As of now, the only answers
we’re hearing are:
“We do not know what the cost
of modernization will be.”
“We are not even sure which
technologies are most needed, or when they would be certified.”
“We do not know if a change
to the Agency’s funding level is truly necessary for modernization
investments.”
At Cessna, I would have a
tough time getting funding to develop a new airplane if I could not lay out
what we wanted to build, why; what it would cost; and how long it would take.
The second argument says the
FAA funding mechanism needs to be changed to cover the declines in the airline
ticket tax.
From a business perspective,
this suffers from the same reality problem. The fact is, ticket prices, and the
taxes that come with them, are going up. They have been going up for more than a year.
At the same time, passenger
traffic is also up.
Besides, if there is a
problem with airline ticket taxes, let’s target the solution to that problem.
We do not need to discard
proven revenue generators like the general aviation fuel taxes or the cargo
waybill. These taxes actually reflect reality and do a great job of
approximating system usage.
I would argue that general
aviation should continue to pay for the costs it imposes on the system through
fuel taxes. They have proven to be highly efficient and effective.
You see, for general aviation
operators, there is no administrative burden with the fuel tax. It is simply
paid at the pump.
This is important to the
thousands of
Fuel taxes are also good
government policy, because they are remitted directly from users to the government. Therefore, the FAA incurs
no administrative costs associated with the taxes.
The fuel tax is in stark
contrast to the costly and burdensome bureaucracy that goes with the user-fee
systems in other countries.
If the commercial ticket tax
is truly a problem, fix that specific problem. Do not create another one.
Do not replace a simple,
fair, and efficient tax on general aviation with complex user fees.
Myth number three: General aviation does not pay its
“fair share” for its use of the National Air Transportation System
The Air Transport Association
is fond of saying that while general aviation represents approximately 30
percent of IFR operations, it contributes a smaller percentage of revenue to
the FAA’s Aviation Trust Fund.
No matter how carefully you
listen, you will never hear them using the most meaningful metric in this
entire debate: that general aviation represents only about 3 percent of all
operations at our nation’s 20 busiest and costliest airports.
The reality is the size,
complexity and cost of our nation’s air transportation system is dictated by
the operating models of just a few airlines.
Let’s face it, the national
aviation system was built with one major priority in mind: to accommodate airline operations — in
particular, to accommodate peak traffic at commercial airline hubs.
The principal drivers of the
costs of the system are the infrastructure and support networks to handle those
operations at hub airports.
Don’t just take my word for
it.
The Government Accountability
Office produced a report that overwhelmingly supported the economic fact that
the primary cost drivers of the system are the airlines’ peak operations at the
hubs.
By contrast, general aviation
is simply not a significant cost driver for the FAA.
Case in point:
Now, in my roles with both
Cessna and GAMA, I care about fair share, too.
So I say – General Aviation
should not pay for the costs the airlines impose on the system by putting
dozens of airplanes into a single airport within a 15 minute window. Nor should
it pay for any other expenses driven by commercial aviation – from which we in
General Aviation do not derive a clear benefit.
Myth number four: User fees will provide stable and
predictable funding for the FAA
The reality? The track record
of aviation user-fee systems, like NAVCANADA and NATS in
As a result, government
bailouts are required, or fees must be increased just when the industry is
least able to afford the spike in costs.
Does this sound like a system
we would value in the
I don’t think so.
Myth number five:
the Very Light Jet is going to place a new and undue burden on the air
transportation system
So let me put the dire
predictions about VLJs in perspective.
First, these aircraft will be
capable of flying efficiently both above and below airline traffic.
Second, just like today’s
general aviation operations, VLJ operations will largely circumvent the large
hubs used by the airlines – and instead operate from smaller airports
with runways as short as
3,000 feet.
Third, even if the most
optimistic predictions about the VLJ market turn out to be true, we will not
see large numbers entering the system over the next five years. That means we
have time to see how this market truly develops.
Now that I have discussed the
myths that, to date, have been clouding the public debate about FAA
reauthorization, I would like to propose a platform for strengthening our
aviation system.
Solution
This is the platform that
general aviation supports.
First, invest in the National
Air Transportation System. Every American benefits from this system. So a
higher contribution— at least 30 percent— to the FAA from the “General Fund” is
appropriate to support the Next Generation Air Transportation System.
In fact, I would like to
invite the airlines to join us in a concerted effort to secure this level of
funding from Congress.
Second, modernize with
satellite and other technologies to increase efficiency.
We in general aviation want a
system that is more satellite-based than today’s ground-based navigation
system. The general aviation sector has proven its willingness over the years
to bear the costs associated with many improvements we all enjoy.
But the FAA must do the
critical work of making the case for which technologies are needed, and what
they will cost.
Third, keep the current
revenue structure, including general aviation fuel taxes.
For the very same reasons I
have outlined, the Report of the National Civil Aviation Review Commission
endorsed general aviation fuel taxes as, “the most appropriate way for this important segment of civil aviation
to pay its share of system costs.”
Fourth, reject user fees for
general aviation.
And, last but not
least…Ensure continuing congressional authority.
Congress’s continuing support
for stable or increased FAA funding shows how important it is that the
legislative branch retain its funding oversight role and its ability to serve
as a check-and-balance to the wishes of the Executive.
I am confident that by
working together on this platform we can help affect policy decisions that are
more enlightened, more realistic, more equitable, and more cost effective.
And I am confident that these
policy decisions will result in a goal we all want to achieve – a strong,
sustainable aviation system for our nation.
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This speech was also
presented at the Wings Club Monthly Luncheon in