Wide-reaching recommendations from Future Aviation Advisory Committee - more studies and spending

"I can guarantee that these recommendations will not sit on a shelf," he told committee members, addressing the general expectations for the committee's eight-month long effort. "Not on my watch...I will ask the full-time person to identify what needs to be done on the recommendations and gather the resources in terms of talented people to go about implementing them."

Citing NextGen, labour relations and the environment, he indicated that the Obama Administration was already in agreement with many of the recommendations, favouring moving forward on these critical issues.

"We are on the same wave length," he said. "Twenty months ago [United CEO] Glenn [Tilton] and I had difficulty in getting attention about NextGen and how to pay for it. I think that has changed and the White House sees how important it is. We have the White House with us now. The environmental stuff, the words on that the Administration is going to like hearing because it is right on target. It won't be easy but it really fits in with what the Administration has been talking about for the last 20 months. This will be well received by the Administration."

However, he stopped short of suggesting that, in a crowded legislative agenda, a contentious Congress (which can best be described as gridlock), the Administration would take the recommendations and run with them. Even so, that is more than anyone expected from the deliberations of FAAC and it remains to be seen whether true progress can me made on any of the five fronts tackled by the group - safety, environment, labour relations, finance and competition.

NextGen pivotal

NextGen came into recommendations across most of the subcommittees, acknowledging its critical role in ensuring the future health of the US aviation industry. The committee recommended DOT establish performance, training and monitoring standards to ensure that safety does not deteriorate as NextGen is deployed.

Among the recommendations presented by the committee are proposals that federal government assist in funding NextGen equipage on aircraft, ensure greater transparency for consumers in airline pricing, expand the sources of safety data available to the Federal Aviation Administration (FAA), and ensure that global airline alliances enhance the viability and competitiveness of the US aviation industry, said DOT shortly after the meeting adjourned.

Recommendations covered a wide range of issues including:

• Developing improved methods of predicting safety risks;
• Improving links between airports and other forms of transportation;
• Enhancing science and technology training for the future and current aviation workforce;
• Ensuring that aircraft operators are able to realize the benefits of NextGen as quickly as possible; and
• Reducing aviation's impact on the environment through use of sustainable fuels and improved aircraft technology, as well as accelerating the use of NextGen equipment to promote greater efficiency.

Both Air Transport Association and GAMA issued statements hailing the committee's work even before the recommendations were presented to LaHood and FAA Administrator Randy Babbitt Wednesday afternoon.

Thinking outside the box

The problem is many of the recommendations call for further study putting off any potential benefits to the airlines industry or consumers. Calling for further study is a typical Washington stalling mechanism but, given the expertise of the committee members, the recommendations pinpoint areas that really require further study to build a case for meeting the recommendations goals. They also reflect the committee's willingness to think outside the box in proposing solutions.

For example, the committee recommended FAA "review and refine what is meant by aviation infrastructure." Based on the conclusions in that study, the department should update and modernize the eligibility criteria for the Airport Improvement and Passenger Facility Charges programs - paid for by passengers - with an eye toward using such funding for "NextGen equipment, operational capabilities, and performance based procedures to produce a demonstrated, near-term improvement in operational performance at airports."

Changes, however, would not only require increases in funding levels for both programs but will require legislative action. FAA would be tasked for developing such legislation for DOT. Airports are already facing stiff opposition from airlines on raising the PFC from the current USD4.50 to USD7 even as they continue to pour on ancillary fees.

Creative thinking can also be seen in its recommendations for a task force on intermodal transportation in addition to a review of the eligibility criteria for Essential Air Services. The committee wants to reform EAS linking it to how intermodal programs can meet the needs of keeping communities connected more efficiently. For instance, intermodal programs are already out there including a United/Continental bus between Pennsylvania's Allentown-Bethlehem-Easton airport to Newark as a codeshare.

Such reforms would acknowledge the realities of EAS service including the fact that the leakage from many EAS points is already at 90%, according to committee member Severin Bornstein, ET Grether Professor of Business Administration and Public Policy at the Haas School of Business at Berkeley. That means the market has already spoken and it is driving to the nearest hub. He likened the investment to getting 10 cents of value for every USD1 spent. He suggested points within a reasonable driving distance of a hub, such as Hagerstown, MD, be eliminated from EAS.

Recommendations, including a limit on the number of EAS eligible points in the lower 48 states, although the committee made a point that EAS should be maintained for certain points especially those in really rural areas and Alaska. Changing EAS could be another hard issue since Congress is reluctant to give up this piece of pork. The program was supposed to sunset in 1988 but it was made permanent by Congress in the 1990s. Just in the past few years, Congress has increased funding for the program despite withering criticism from the media.

Here again, the committee is thinking outside of the box in tying the EAS to the development of intermodal programs. It also indicated that any legislation developing an infrastructure bank, include in the eligibility, projects that link airports with other forms of transportation, such as rail and transit to create transportation hubs that serve multiple cities. It wants barriers to intermodal transport removed.

Also on the study agenda would be prioritizing the FAA safety agenda. To this Babbitt pinpointed one of the toughest challenges as the committee recommended the DOT use data analysis to determine whether current priorities are getting the biggest safety bang for the buck.

"As everyone knows, I have a great deal of help establishing priorities including from our 535 friends not far from here," he said in a massive understatement on the political interference coming from Capitol Hill. Indeed, the agency's agenda is riddled with Congressional mandates which distract resources from pursuing safety initiatives which are more important.

Tax burden

One of the more important study recommendations focuses on the tax burden for airlines and passengers. The airline industry has been grousing about its disproportionate tax burden for years without success. But this time it came at the issue from a different angle by suggesting a study on the tax burden and how it compares to other modes. United Chair Glenn Tilton noted that passengers are targeted by no less than 17 taxes and fees from three cabinet level departments and six agencies. The committee also wants the study to determine how the taxes are levied compared to the provided by the government.

Hudson Securities Analyst Dan McKenzie, one of the committee members, noted that the disproportionate share of taxes in the average ticket price is a concern on Wall Street since it affects airline pricing ability. "Despite the fare volatility this year, year to date through October fares are only up 2% from the average ticket price in 2000," he said.

The committee is also recommending that the disparate agencies that tap the passenger purse develop a more efficient and rational tax system and ensure that it actually is meeting the promised public benefit. Right now, it is clearly not, given the failure to field a modern air traffic control system for over 40 years. The committee is also questioning the appropriate balance between the general tax fund and user fees suggesting the implementation of such taxes should recognize the significant role commercial and general aviation play in fostering economic growth and development.

Given the interesting questions posed by the committee, this study should reveal some interesting conclusions since taxes ensure aviation users pay their own way for an inadequate system while other modes, such as Amtrak and the development of high-speed rail, are heavily subsidised.

Even so, in the past few decades government, stymied by entitlement programs such as medicare and social security have increasingly relied on user fees to raise the additional funds necessary. However, DOT should grab the taxation issue and make short work of the study since part of Obama's agenda cited the business tax burden in its reasoning to tackle tax reform.

Finally, the committee wants DOT to study jet fuel volatility, as well as the infrastructure in developing and delivering jet fuel. Here again, it called for a study on jet fuel production and distribution infrastructure both on an off the airport. Noting the aging infrastructure at major airports and metro areas, the committee said these "weak links create additional threats to availability and the economic health of the aviation industry."

The Finance Subcommittee was unable to reach consensus on the role of speculation in fuel volatility despite airline contentions otherwise. McKenzie made the point that when fuel costs are 30% of overall airline costs it is all too easy to wreak havoc on airline financials. "I personally would like to see that concern raised to a higher level he said.

The committee did recommend continued involvement by LaHood in the US Commodity Futures Trading Commission (CFTC) rule making process resulting from financial reform. It wants LaHood to provide any information that might be helpful in the CFTC's investigation into the impact speculative activity has on fuel prices and to ensure CFTC understands the burden that volatility places on the economy, especially aviation. It also wants DOT to support any legislation that would reduce fuel volatility.

Increased government/private investment

Many recommendations pushed increased government spending at a time when Congress has become tight fisted so those recommendations face an almost impossible battle, given Congress's lack of interest in transportation -- much less -- aviation issues. Those recommendations may fall to political expediency.

Despite wide-spread recognition on aviation being a critical driver of the economy, politics is bound to intercede in an austerity environment. This only means that the industry must do a far better job than it has every done before to sell these programs. All previous attempts to enlist the public in a grass-roots effort to bring aviation to the top of the legislative agenda have failed. Instead, passengers are voting with their feet by not traveling at all or taking another mode when they get frustrated enough with the system delays, cancellations and security hassles which cost airlines USD9 billion at the top of the last business cycle.

While private industry is already investing in fuel efficiency and alternative fuels on several levels, the committee recommended government investment in in both. It also called for the creation of a government/industry partnership to develop funding ideas such as tax credits.

The committee achieved consensus on nearly every issue but Bornstein broke ranks on the recommendation for government investment in aircraft equipage, saying the business case has not been made for such government spending. The industry, however, could easily say the business case has not been made for equipage given FAA's record on failing to deliver on modernization. The industry has already spent millions for previous equipage needs only to have the aircraft retired before the equipment was every used.

However, the committee suggested a laundry list of financing options including grants, loans, leases, and loan guarantees. Airlines have, so far, been unsuccessful in arguing that since it is passenger fees and taxes that feed the Aviation Trust Fund, it should be used for equipage. The committee further suggested that financing could be managed through an infrastructure bank or other financing vehicle. But key to this are the commitments from both government and industry on fielding the benefits of NextGen and mitigating the risks of equipage. It recommended incentives such as best equipped, best served that FAA already advocates.

Competition

FAAC offered six recommendations on the competition front, including fostering global alliances and improving the global competitiveness of airports, airlines and manufacturers, including leveraging LaHood's role on Obama's committee to increase exports. It wants DOT to ensure US carriers maintain an equal footing versus foreign airlines which could impact current export financing practices which airlines say is putting them at a competitive disadvantage against foreign carriers who can take advantage of better financing rates.

Recommendations included expanding Open Skies, saying many of the fastest growing markets remain restrictive. The State Department just cut its 101st agreement ushering open skies with Brazil, one of those booming emerging markets.

Future Open Skies treaties should also include fare wages and benefits a key component of its labour recommendations. Any treaties, said the committee, should ensure basic human rights in freedom of association in order to form a collective bargaining unit. "Some on the labour subcommittee suggested we wanted to mount the next Bolshevik Revolution," joked Committee Member and Association of Flight Attendants President Pat Friend.

The committee also recommended DOT encourage the National Mediation Board implement the Dunlop II recommendations - now in the early stages of implementation - making mediations more efficient and effective as well as in fostering better understanding on how labour and management can work together in solving issues. The committee also wants DOT to advocate for better funding and resources for NMB.

Amongst the items that DOT can pursue immediately, LaHood jumped on the proposed labour/management summit idea, suggested for Sept-2011, saying he would pursue that. It is designed to "bridge the gap of information and understanding that generally exists today between the aviation workforce and its management with the ultimate goal of a healthier industry for all."

As expected the vast majority of labour discussions centered on airline labour/management relations forcing one committee member to clarify that airports have no such problems.

It was noted that such hot issues as maintenance outsourcing was more than a labour issues. "This was original raised by Consumer Reports as a consumer safety issue," said Committee Member and Consumer Reports Aviation Editor Bill McGhee. "It may be a hot-button issue from a labour perspective but there was significant discussion on FAA's oversight ability in maintenance outsourcing. Because the nation's safety record is so stellar, it is harder to achieve improved safety. Trying to determine the risk is a tougher thing in some ways. This is a still a potential risk because outsourcing is a dramatic change in how things are done." The committee made no recommendations on outsourcing, however.

Environment

Much of the Environment Subcommittee's recommendations reiterated current industry commitments on lowering emissions by 2020 and halving them by 2050 but called for harmonization and support for the global sectoral approach adopted at ICAO's October meeting.

Sustainable alternative fuels could reduce life cycle carbon neutral emissions by 5% by the end of the decade, said the committee in pushing for more investment in the technology but noted the challenge to increase feedstock and production.

It also cited a 1.5% increase in fuel efficiency that can be obtained from the adoption of operational practices and technology, adding that a step change is needed for anything more when it comes to airframe and engine developments. Given the lead time to develop and field new airframe and engine technology, the committee is seeking to accelerate introduction of new programs if the industry is to meet its 2050 targets. It called for more increased government funding for research and development for FAA's Continuous Lower Energy, Emissions and Noise (CLEEN) technology program as well as extending R&D tax credits, saying it would keep the US in the lead with such technology as well as create jobs.

It recommended that NextGen equipage should be fully deployed in four years to gain the maximum benefits although the 12% emissions improvement promised would not come until NextGen is completed. The committee also wants DOT to develop and deploy a ground-taxi-delay-management program within three years. Finally it wants the development of an airport energy efficiency program to reduce emissions from airport power sources and increase airport energy efficiency.

Transparency on more than pricing

Consumers issues would also require increased investment by both airlines and DOT. The competition committee went beyond the final consumer rule that DOT expected to be published next Spring and expanded transparence well beyond making fares and fees more transparent before a purchase. Committee Member and Consumer Reports Aviation Editor Bill McGhee outlined several reforms necessary.

The committee recommended that contracts of carriage should become much more transparent and more easily readable to help passengers understand their rights. It also said transparency needs to be extended to codeshare relationships so passengers will know they are flying a regional even if they booked with a major. The same should probably be extended to alliance relationships.

In one of its most interesting recommendations, the committee attacked the assumption that the monthly consumer reports issued by the DOT to help consumers make purchasing decisions are useful, recommending the reports be reformed. These reports are actually deceptive and puts regionals at a competitive disadvantage because it does not assess exactly who is causing the delay or cancellation -- the mainline or the regional. Thus regional statistics often look worse than they are. Many have been pushing for this change for years to no avail.

Safety

It was a little surprising to hear the committee discuss that move from aviation safety improvements developed from accidents - called the forensic approach - to data-driven safety enhancements since much of that transition was made in the 1990s, continuing into this decade. However, the committee did address a glaring omission when it comes the the many voluntary and mandatory reporting programs that have contributed so much to safety such as Safety Management Systems (SMS) now being adopted across the industry as well as the Aviation Safety Action and Flight Operating Quality Assurance programs. There is also the relative new program designed for air traffic controllers.

It recommended DOT seek legislative relief guaranteeing against the use of such information for non-safety purposes such as litigation or by the media. This has been a significant threat to current programs as well as expanding into new programs. Indeed, the committee recommended the DOT confer with other industry stakeholders in identifying and developing new resources for safety data, specifically mentioning airports.

The committee also recommended that the FY2012 budget reflect a focus and priority in developing "improved tools and methods in order to provide a robust aviation system predictive safety risk discovery capability."

Finally, departing from its focus on systemic issues, it recommended the department develop education programs for parents who travel with their children under two as lap children. The National Transportation Safety Board recently held a forum on the issue recommending the FAA develop a rule requiring that lap children be strapped in. The FAA has always resisted such efforts saying that the increased ticket costs could force families to drive, increasing the risk to the entire family. However, the committee questioned whether changes in the airline industry - including the development of low-cost carriers - challenge those assumptions.

"Some strongly feel this should be a mandate," McGhee told LaHood, who asked whether it should be a rule making. "Our very first question was to resolve the science of this issue and that is everyone agreed that lap children are less safe than those who are strapped in. The potential diversion of families to their cars is a valid issue but the data that supports that is old -- 15 years in some cases. The industry itself has changed. There are more low-cost carriers begging the question whether the diversion data is even correct any more. Many are concerned that parents are not aware of the dangers and that is why we recommended DOT develop an education program."

The 19-member committee included academics, airports, airlines -- including United Chair Glenn Tilton, JetBlue CEO Dave Barger and Republic CEO Bryan Bedford -- a marked departure from the last commission which did not include airline representatives on board.

FAA can take action

There is much the DOT and FAA can do without waiting for legislative solutions including answering the call for more clarity on contracts of carriage and codesharing and the reform of the monthly consumer reports. Its current consumer rights notice of proposed rule making is already tackling transparency of fees and fares although it is unclear whether that will include a requirement to list them in all marketing and advertising on all travel booking sites or just as a link to the salient page on the carrier's website.

DOT can also work with the Department of Education in promoting more Science, Technology, Engineering and Math (STEM) education which has been cited across all industries as something America needs.

Future of Aviation Advisory Committee Recommendations

Environment

1. Sustainable Alternative Aviation Fuels

• Exercise strong national leadership to promote and showcase US aviation as a first user of sustainable alternative fuels. This would involve increased coordination and enhancement of the concerted efforts of government and industry to pool resources, overcome key challenges, and take concrete actions to promote deployment of alternative aviation fuels through certification, funding, commercial production and deployment, "book and claim" crediting , and international and domestic acceptance. The DOT should take a lead role within the Biofuels Interagency Working Group and provide increased support to FAA's alternative fuels work. These actions would affirm a US global leadership position in sustainable alternative fuels for aviation.

2. Research and Development Related to Airframe and Engine Technologies

• Accelerate aircraft technology development with more robust research and development by government and industry. Seek the permanent extension of industry research and development tax credits. Seek significant increases in funding to programs such as the FAA's Continuous Lower Energy, Emissions and Noise (CLEEN) technology program, and continue to advocate close coordination with National Aeronautics and Space Agency (NASA) aeronautical research programs to develop aircraft technologies.

3. Operational and Infrastructure Improvements

• Advocate for substantial additional targeted investment to accelerate equipage elements of NextGen that will have significant near term benefits and increase likelihood of successful deployment. Aim for deployment of accelerated equipage within the next 4 years. In addition, establish a ground taxi delay management pilot program and recommend appropriate deployment of taxi delay management methodology for U.S. airport operations within 3 years. Lastly, establish an airport energy efficiency and emissions reduction program to reduce emissions from airport power sources and increase energy efficiency at airports.

4. Harmonized Sectoral Approach for Aviation CO2 Emissions Reductions

• Lead an effort to align federal aviation policy to support an aviation sector approach to carbon emissions. Building on the ICAO resolution adopted on 8 October 2010, advocate for a coordinated global and domestic framework for aviation carbon dioxide (CO₂)emissions. It is important to set a strategic course for further international agreement through ICAO and follow with bilateral negotiations to secure the support of other countries. The Secretary should advantage of industry assets to develop practical global implementation methods (e.g. IATA members have already agreed to create an emissions inventory system - the basis for any measurement of emissions reduction progress). Such steps would enhance the confidence of the aviation industry to make needed investments in the technological, alternative fuel, infrastructure and operational improvements necessary to meet greenhouse gas emissions targets and provide a harmonized approach among key aviation nations (markets) around the world.

Finance

5. Extend the Alternative Minimum Tax Exemption for Airport Private Activity Bonds for Four Year

• The FAAC recommends that the Secretary should support federal legislation to provide a four year extension to the Alternative Minimum Tax (AMT) exemption for airport Private Activity Bonds (PABs). An extension of the AMT exemption for PABs must be accomplished by federal legislation. During the 111th Congress, efforts have been made to both extend the current AMT exemption in comprehensive tax reform and job creation legislation and to provide a permanent AMT exemption through stand-alone bills, primarily S. 138 (Sen. Kerry) and H.R. 425 (Rep. Neal). US commercial airports are mainly owned and operated by government entities and airport improvements are often multi-year projects, providing numerous construction jobs helping to stimulate the community. This exemption lowers airport financing costs allowing for more development or reduced debt.

6. Funding Accelerated Equipage of Aircraft

• The FAAC proposes to the Secretary that the federal government undertake a significant financial investment to achieve extensive public benefits throughout the accelerated NextGen equipage of commercial and general aviation aircraft. This federal commitment must be matched in some fashion by financial or operational commitments, for example reduced CO2 emissions, on the part of commercial and general aviation aircraft operators. This Public/private partnership in equipping aircraft should focus on equipping aircraft and training staff to use the key NextGen technology and operational capabilities including performance-based navigation (PBN), automatic dependent surveillance - Broadcast (ADS-B), ground-based augmentation system (GBAS) and Data Communications. The FAAC believes a menu of financial options - grants, loans, leases, and loan guarantees - should be designed, in consultation with industry, and this financing can be managed through an Infrastructure bank or other financing vehicle. The form and structure of the financial options offered should depend on the appropriateness of the incentive for the technology and capability being funded, the aviation operators involved, the costs and benefits associated with the particular technology or operational capability and the share responsibility between the public and private partners. An important part of the this program will be the detailing of commitments that both the FAA and operators should make to deliver promised benefits or mitigate against financial or other risk.

7. Delivering the Benefits of NextGen

• The Secretary should fully endorse and focus on ensuring that FAA delivers the operational capabilities, procedures, and approvals necessary for operators to realize the benefits from the NextGen air traffic control system as quickly as possible. Making progress on improving the environmental review process, developing a well-crafted and balanced Best Equipped, Best Served (BEBS) program, and fully leveraging the operations of those who have already invested in performance based on navigation or ADS-B are challenging but must be a high priority for DOT and FAA if public benefits are to be realized as well as the promised benefits to operators that equip. Furthermore, the Secretary should require the FAA to develop and commit to a timetable of when requirements will be set, when operational capabilities and procedures will be available, what training will be necessary and what will be the required authorizations.

8. Eligibility Criteria for Airport AIP and PFC Programs

• The FAA should review and redefine what is meant by "aviation infrastructure" and based upon that study it should update and modernize the eligibility criteria for AIP and PFC projects. As part of this review, DOT and FAA should consider whether investing AIP and PFC dollars in NextGen equipment, operational capabilities, and performance based procedures are needed to produce a demonstrated, near-term improvement in operational performance at airports. If changes are warranted, FAA should do as much as possible of this update administratively and develop legislative recommendations to the Secretary for the remainder of the suggested changes. An update of the guiding authorities in this area should be focused on allowing more flexibility by airports in using AIP and PFC funds. Airport Committee members believe these changes must be accompanied by increases in AIP and the PFC level. Airline members believe that providing more flexibility can be achieved without these increases. FAA should determine or make recommendations on whether AIP and PFC levels need to be adjusted based on eligibility criteria changes.

Competition

9. Global Competitiveness: The Secretary should

• Foster conditions that enable global airline alliances that enhance the viability and global competitiveness of U.S. airlines, airports, and manufacturers and protect and create U.S. aviation industry jobs, by reaffirming the general objectives of DOT's 1995 Statement of U.S. International Air Transportation Policy.¹

• Ensure that, as DOT performs its public interest analysis, it gives substantial weight to existing statutory criteria that would help ensure an economically healthy and globally competitive U.S. airline industry and prosperous workforce, including:

• "strengthen[ing] the competitive position of air carriers to at least ensure equality with foreign air carriers, including the attainment of the opportunity for air carriers to maintain and increase their profitability in foreign air transportation;
• placing maximum reliance on competitive market forces and on actual and potential competition to provide the needed air transportation system and encourage efficient and well-managed air carriers to earn adequate profits and attract capital;
• promoting, encouraging and develop[ing] civil aeronautics and a viable, privately-owned United States air transportation industry; and
• encouraging fair wages and working conditions.

• Build upon and expand DOT's Open Skies initiative, focusing on (1) the largest and fastest-growing international markets that remain constrained by restrictive bilateral aviation agreements; (2) ensuring "de facto" market access and a level playing field for U.S. passenger and cargo airlines facing "doing business" impediments abroad; and (3) promoting employment opportunities for U.S. airline workers.
• Leverage the Secretary's appointment to the President's Export Promotion Cabinet, and support an expansion of DOT's role in promoting U.S. aviation exports for U.S. airlines, manufacturers, and airports, and facilitating international tourism.

10. US Aviation Industry Viability

• The Subcommittee recommends that the Secretary commission an independent study of the federal aviation tax burden on passengers, airlines and general aviation to determine if existing levels of taxes and fees sufficiently balances the Department's statutory mandates to "encourage efficient and well-managed air carriers to earn adequate profits and attract capital…,"¹ "promot[e], encourag[e], and develop civil aeronautics and a viable, privately-owned United States air transport industry,"² and ensur[e] that consumers in all regions of the United States, including those in small communities and rural remote areas, have access to affordable, regularly scheduled air service."³
• This study, which should include input from aviation stakeholders and independent economists, should address the following questions:

• How do the federal taxes imposed on the U.S. aviation industry compare to those of other modes of transportation?
• Is the existing level of aviation taxes and fees levied efficiently and effectively for the services provided by the federal government?
• Are there more efficient ways to collect and administer existing aviation taxes and fees that would save taxpayer and aviation industry dollars?
• Would regular consultation between those departments and agencies that administer aviation taxes and fees prior to implementing any changes to tax rates and policies result in (1) a more efficient and rational aviation tax system, and (2) the desired industry and social outcome?
• What is the appropriate balance between General Fund financing and Airport and Airway Trust Fund financing of capital and operating costs of the national aviation system, recognizing the significant role commercial and general aviation play in fostering economic growth and development?

• The Subcommittee recommends that the Secretary review the results of the study and pursue appropriate legislative and regulatory actions that may be needed to ensure that existing and any new aviation taxes and fees applied to passengers, airlines and general aviation are effective and collected efficiently, appropriately recognizing the role commercial and general aviation plays in fostering economic growth and development.

11. Airline Competition and Passenger Protections

• The Subcommittee believes that the Secretary of Transportation should ensure transparency in:

• Airline pricing, including ancillary fees;
• The disclosure of flight operators, such as code-share and commuter flights;
• Disclosure of airline contracts of carriage, including easy consumer access to those contracts; and
• In Departmental reporting of consumer air travel statistics, particularly with respect to code-share operations of regional carriers.

12. Intermodalism: The Secretary should

• Examine the Essential Air Service program (EAS) and identify multimodal service opportunities for EAS-eligible communities;
• Recognizing that modernization of the air traffic control (ATC) system is the highest priority, recommend that legislation establishing an infrastructure bank, or any appropriate infrastructure legislation, give priority consideration to projects that link airports with other forms of transportation, such as rail and transit to create transportation hubs that serve multiple cities. This consideration should not result in the diversion of any funds from ATC modernization efforts, and should be done in conjunction with appropriate environmental and cost-benefit analysis. Transportation providers, including airports, could compete for funding to build the airport-link system; and
• Establish a task force on intermodalism, including representatives from all modes transportation, including aviation, to examine the status of efforts to remove barriers to intermodalism, make recommendations about advancing projects that achieve the movement of passengers and goods in a multi-modal fashion, and document the benefits of intermodalism. Benefits and costs should be measured at the overall transportation system level.

13. Essential Air Service Reform

• First, as an interim measure, limit the communities within the contiguous 48 States that are eligible for air service subsidies to those that were receiving it on a date specified in 2010.
• Second, update the criteria for EAS eligibility, recognizing there are communities that are or can be efficiently served by other modes of transportation through "leakage" to nearby airports that provide good connections and often low-fare service, or intermodal transportation services
• The Subcommittee recognizes the increasing importance of intermodal solutions to connect small and rural communities to the national air transportation system. The Subcommittee therefore recommends that the Secretary implement its recommendations on intermodalism expeditiously to support these related recommendations on EAS reform.

14. Jet Fuel Price Volatility

• While the Subcommittee is unable to reach consensus as to the role that investor actions and speculation have played in the drastic fluctuations in oil prices over the last few years, a subject on which outside experts also disagree, pursuant to DOT's statutory mission of "promoting, encouraging, and developing civil aeronautics as a viable, privately-owned United States air transport industry,"¹ the Subcommittee believes that the Secretary should:

• continue to be formally involved in the U.S. Commodity Futures Trading Commission (CFTC) rulemaking process to provide any information that might be helpful in the CFTC's investigation into the impact of investor and speculative activity on the price of oil;
• communicate to the CFTC the economic stress imposed on the industry by fuel price volatility; and
• support responsible regulatory intervention to reduce the volatility attributable to such speculative activities if the CFTC concludes that investor activity or speculative trading of oil futures has played a significant role in price volatility.
• Jet fuel price and supply volatility can result not just from oil price fluctuations, but also from disruptions in the downstream production and distribution of aviation fuels. A number of major metropolitan areas and major airports have limited and aging infrastructure for the distribution of jet fuel. In addition to oil price volatility, these weak links in the distribution network create additional threats to the economic health of the commercial airline and general aviation industries. The Subcommittee believes that the Secretary should undertake a study on the state of our nation's downstream infrastructure - both on and off airport - for storage and distribution of aviation jet fuels.

15. Science, Technology, Engineering & Math Education Programs (STEM)

• Coordination and Focus within DOT: Workforce development on STEM should be a centralized and focused top tier initiative of the Department of Transportation. The Secretary should assign the Assistant Secretary for Administration the task of developing, overseeing, coordinating, implementing, and integrating a strategic workforce development plan that includes STEM education programs and activities for the current and future workforce. A strategic plan would identify a) key strategies and program areas for outreach to students of all ages; b) subject areas for current and future workforce development that support future DOT needs (such as FAA skills in a NextGen environment); c) opportunities for professional and management intern/fellowships with the Department and its agencies; d) partnerships with industry that foster innovation and collaboration; and e) create an advisory council comprised of outside experts focused on aviation and aerospace can provide expertise to help identify, align, and coordinate efforts on workforce development and STEM education within the Department. Additionally, we encourage greater collaboration and coordination with the Department on STEM and workforce development. For example a transportation workforce development office within the Research and Innovative Technology Administration could be instrumental in fostering broader cooperation throughout the Department on workforce development initiatives, as well as between programs like the University Transportation Centers and the FAA Centers of Excellence.
• Educational Outreach and Recognition: The Secretary should take steps to increase outreach to educational institutions (from pre-kindergarten to institutions of higher education) to raise the visibility and profile of aerospace and aviation by enhancing existing programs to develop or expand aerospace and aviation education programs geared to support the future needs of aviation and aerospace , including implementation of NextGen technologies. The Secretary should also consider improving programs and connections with non-profit, independent, and for-profit two and four-year educational institutions (including community colleges) that give students hands-on experience applicable to the aviation and aerospace workplace. Finally, the Secretary should establish an award for innovation to recognize persons, businesses, or organizations that develop unique scientific and engineering innovations in aerospace and aviation (similar to the Baldrige award for quality or the Collier Trophy for aircraft).
• Interagency/Intergovernmental Collaboration: The Secretary of Transportation should work with the Secretary of Labor as an integral part of the Interagency Aerospace Revitalization Task Force, originally established in 2006, to implement a national strategy focused on recruiting, training, and cultivating the aerospace workforce. The Task Force should incorporate core manufacturing business concepts and principles, such as lean manufacturing, operational excellence, continuous process improvement, etc. into the workforce development process to ensure America can compete in the global manufacturing marketplace that underpins the success of our aviation industry. Additionally, the Secretary should work with the Department of Education to provide resources that would create state-of-the-art STEM elementary and secondary educational facilities.

Labour

16. State of Labour/Management Relations

• Industry experts on both sides recognize that a new approach to solving traditional labour-management differences is required to provide a stable and efficient air transportation system which serves the best interests of the American public. An independent joint labour management committee was established in September, 2009, Dunlop II. Part of its goal was to find ways to improve the mediation process and delivery of mediation services. Dunlop II's final report was issued in April. The Dunlop II recommendations addressed the various challenges faced in collective bargaining today - not only through improvements in the mediation process, but also through providing suggestions on how labour and management could work closer together. These recommendations are in the very early stages of implementation and some have not been addressed at all as yet.
• The Labour/Workforce Issues Subcommittee of the FAAC recommends that the Department of Transportation urge the National Mediation Board to expeditiously implement the Dunlop II's recommendations. We also recommend that the Secretary advocate for adequate funding and resources to implement such recommendations.

17. Workforce/Management Conference

• The Subcommittee proposes that the Secretary of Transportation endorse and implement a semi-annual Aviation Industry Workforce-Management Conference beginning in September of 2011. The mandate of the Conference would be to bridge the gap of information and understanding that generally exists today between the aviation workforce and its management with the ultimate goal of a healthier industry for all.

Safety

18. Legal Protection of Voluntary Safety Data and Information

• The Secretary of Transportation should seek comprehensive legal protections for voluntary and mandated (SMS) safety data programs and information to ensure their continued benefits to safety. The Secretary should pursue essential legislative action that is vital to provide ongoing protection of safety information sharing systems in the United States, and work with the Congress to introduce such legislation at the soonest possible opportunity.

19. Predictive Analytic Capabilities for Safety Data and Information

• Beginning with the FY2012 budget for the Federal Aviation Administration, the Secretary should provide focus, priority, and resources to develop improved tools and methods in order to provide a robust aviation system predictive safety risk discovery capability.

20. Expanding Sources of Voluntary Data

• The Secretary and the FAA Administrator, working with aviation system partners and other industry and government groups and advisory committees, should identify potential new and valuable sources of safety data, and establish criteria for when/how those sources would begin will be included.

21. NextGen and Enhanced Safety Performance

• The Secretary should ensure that safety performance standards and training are embedded into NextGen planning, implementation, and monitoring.

22. Identification of Safety Priorities

• The Secretary should quickly review the existing regulatory and safety initiative calendar, and provide parameters and criteria for the FAA to prioritize its current and future rulemaking program. This review should include industry, or at a minimum seek industry input, and the results should be made publically available. In addition, the Secretary should direct the FAA Administrator to review field safety and enforcement policies, procedures, and training to ensure they are aligned with the Safety Management System philosophies and supporting policies established by FAA headquarters.

23. Child Safety on Airliners: The Secretary should

• Utilize the full resources of his office to continuously educate the flying public about the dangers of flying with lap children;
• Update the economic and safety data concerning families traveling with small children, including incidents and accidents involving injuries and deaths;
• Based on the information provided by these findings, the Secretary should take necessary action, which may include a rule making or other appropriate next steps.