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Tenth Annual Aviation Summit, Remarks by Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce

Tuesday, April 26, 2011 - 8:00pm

Remarks by
Thomas J. Donohue
President and CEO, U.S. Chamber of Commerce

As prepared for delivery

Introduction

Thank you, Carol, and good morning everyone.

I’m glad you could join us today.

I’d like to thank Carol and the National Chamber Foundation team for putting together another outstanding conference.

I understand this is the best attended aviation summit we’ve ever had.

 

State of the Aviation Industry

I think the high level of interest is being driven by one overriding question: What’s next for the aviation industry?

The industry has weathered a decade of storms since we first started hosting this annual summit 10 years ago.

There was 9/11 and the war on terror.

There were two recessions. The last one was the most severe since the Great Depression.

The silver lining in those storm clouds was that suppressed demand took pressure off of a system that was reaching the limits of its capacity.

The bad news: $60 billion in losses for passenger airlines and 150,000 jobs lost.

Airports had to get creative to accommodate new and constantly evolving security requirements.

Cargo airlines struggled to deliver on customer expectations like next business day delivery while keeping up with security requirements.

And don’t forget huge spikes in fuel costs. Wildly fluctuating fuel prices can threaten profitability in an instant.

And yet, in what may have been the most challenging decade in aviation history, safety actually improved.

Several airlines managed themselves back to profitability through consolidations, alliances, adjustments to fleets and schedules, and a la carte offerings for customers.

Overall, the past decade has been tough on aviation. Where do we stand today?

The FAA says the industry turned a profit last year of $9.5 billion as the U.S. economy rebounded.

So we’re doing a little better. But there’s a difference between doing better and doing well—we are not yet doing well.

There are many challenges ahead. Perhaps the biggest one is this: How are we going to deal with an expected 36% increase in fliers by 2015 and huge increases in cargo?

Today we don’t have the infrastructure to accommodate that. It’s been almost four years since the FAA bill was reauthorized. We are making progress toward getting a good bill now, but we’ve lost a lot of time.

Funding for badly needed systems like NextGen has been inadequate and its implementation too slow.

Every aircraft flying in the National Airspace System still needs its own equipment.

Rising energy prices, burdensome regulations, and mischief by national labor boards are also major obstacles to success.

Why should the public care about these challenges to the aviation industry?

Let’s not forget—commercial aviation accounts for $1.3 trillion in economic activity, or 5.6% of the U.S. economy, and supports 12 million jobs.

The nation’s economy relies on a safe, secure, and efficient aviation system.

So how do we get from doing better to do doing well? By concentrating on the fundamentals—sound infrastructure, modern technology, reasonable regulations, a flexible workforce, and stable energy prices.

So here’s a brief flight plan to help the aviation industry take off.

 

Infrastructure

Nothing is more fundamental than basic infrastructure.

We need to expedite air traffic modernization and grow system capacity through smart investments.

That’s why we need to get the FAA reauthorization bill across the finish line. It’s been passed by the House and Senate— let’s get the conference going and done.

What will the Chamber look for in an FAA bill?

First, adequate investment to fully realize the benefits of NextGen.

Components of that system are operating.

A few weeks ago the high-tech Air Traffic Control System Command Center was dedicated.

It’s an infrastructure element that drives increased productivity and greater mobility for passenger, freight, and business aviators. And, of course, reinforces our commitment to safety.

The command center is a true success story, but we can’t stop there.

We’ll never achieve the full benefits of NextGen if we don’t equip planes with the technology necessary to make the whole system work properly.

Let’s be frank—equipage represents a large investment. Perhaps as much as $5 billion, just for passenger airlines, according to ATA.

We don’t think that cargo, business, or passenger aviation should have to bear the full brunt of this cost when there is such a great public benefit from NextGen.

That’s why we believe the FAA reauthorization bill must assist the aviation community with equipage necessary to move NextGen forward.

And let’s not forget about airports themselves—we must ensure they are adequately funded.

Slashing funding for the Airport Improvement Program is a classic example of cutting off your nose to spite your face.

We need adequate funding levels to maintain, modernize, and expand our airports.

How we invest aviation funds is as critical as the overall amount.

Congress must provide budget firewalls ensuring all dedicated aviation revenues are utilized exclusively for their intended purposes.

The Airport and Airway Trust Fund should not be used to pay for security costs, but specifically for air traffic and airport maintenance and improvement.

And by the way, when it comes to building infrastructure or making changes to manage airspace, we need to streamline the project review and approval process. It takes too long to build anything in this country and everybody knows it.

The bottom line is this. We have a choice—we can make smart investments to ensure our aviation system remains one of the crown jewels of our economy or we can starve it of badly needed funds and watch jobs and economic growth disappear.

Congress has many difficult choices facing it today—this shouldn’t be one of them.

 

Energy

One way to restore consistent profitability to the airlines is to bring more stability to volatile energy prices.

Jet fuel prices increased more than 20% in the first two months of this year alone, cutting deeply into profits.

Consider this: If jet fuel prices increase from $2.15 last year to $3.00 this year, it would raise the U.S. airlines’ fuel bill by $15 billion.

When it comes to energy, we are shooting ourselves in the foot.

We have locked away vast reserves of oil, oil shale, and natural gas on federal lands and off both coasts.

Meanwhile, we are sending hundreds of billions of dollars per year overseas to buy other people’s energy—and a lot of it from dangerous, unstable places. Does that make any sense to you?

Federal lands alone are estimated to contain 231 trillion cubic feet of natural gas and 31 billion barrels of oil. Producing at least some of that energy could reduce our imports, ease price volatility, create American jobs, and generate tax revenues to reduce the deficit.

But even less sweeping reforms can make a difference. Imagine the impact that more runways would have—you would have fewer planes unnecessarily circling in the air or idling on the ground.

It’s time to increase domestic energy production across the board—traditional and alternative. Our national and economic security depends on it.

 

Labor

More reasonable labor policies would also have a tremendous positive impact on airlines.

Labor is the airline’s No.1 cost.

We need strong government action on funding, infrastructure, and energy. But on labor, we need government to ensure a safe working environment and workers’ rights and then get the hell out of the way!

We’re deeply concerned about politically driven proposals by Congress and the administration that will undermine the success of the aviation industry.

We were very pleased that the House version of the FAA reauthorization bill included a provision repealing a recent ruling by the National Mediation Board made at the behest of the AFL-CIO.

The NMB ruling would overturn more than 70 years of precedent and make it possible for a union to be organized without the support of a majority of employees in class—and make it virtually impossible to decertify a union.

The way the rule was rammed through the board—where thousands of comments were ignored, the minority member was excluded, and her dissent censored—underscores its blatantly political nature.
The time-tested rule jettisoned by the Board was fair, it worked, and it should be maintained.

In a separate matter, we’ll do everything in our power to oppose the National Labor Relations Board’s attempt to prevent Boeing from building their new 787 at its nearly completed plant in South Carolina and forcing them to build the plane in Washington state.

We are on a slippery slope when the government attempts to interfere in the legal, legitimate, and reasonable decisions so it can reward politically favored groups.

We won’t stand for it.

 

Cargo and Business Aviation

When discussing aviation, we can never overlook the importance of cargo and business aviation, which help create jobs, improve productivity, and facilitate trade.

I could give a separate speech on each of these topics, but let me mention a few issues for each.

On cargo, we must respond rationally to security threats, and strive to elevate security and trade facilitation simultaneously. These two goals are not mutually exclusive.

Security mandates will continue to change as threats change. How we fashion and implement security mandates makes all the difference.

We must avoid overly burdensome and restrictive rules, like the failed “100%” programs that damage our economy and badly undermine the just in time delivery system so vital to our economic growth.

Instead we should be developing more flexible rules that meet the same goals in a more efficient and productive way.

Further, we should be building off of the success of existing trusted shipper programs and harmonizing them with the international community, rather than creating new and redundant programs for business.

Another cargo issues of importance is the harmonization of regulations governing the shipment of lithium ion batteries, which the Chamber strongly supports.
You know, it seems like a small issue—and lithium ion batteries are, in fact, small in size—but they play a critical role in our mobility and productivity, powering electronics that keep us on the go, like laptops and smart phones.

Harmonizing our rules with international standards would enhance safety and minimize the financial and technical burdens of complying with multiple or inconsistent requirements.

This is a very important issue and we must get it right.

On business aviation, we think the attempt to make public flight plans for business aviation users is ill-advised.

It poses a security threat to the users of business aviation. There’s no legitimate reason to do it.

We said as much to the House when we weighed in on FAA reauthorization, and we’re pleased that their version of the FAA bill blocks the agency from moving forward.

 

Conclusion

If you’ll excuse the pun, I’ve given you a quick 30,000-foot view of some basic steps we can take to improve the aviation industry—an industry that is so critical to our economic success and our way of life.

Much like the U.S. economy, U.S. airlines are climbing out of a deep hole and have a long way to go to be financially strong.

To assist in that process, we must redouble our efforts to educate policy makers about the importance of aviation.

We must ensure federal policies recognize the link between our nation’s aviation network and jobs, economic development, global competitiveness, quality of life, and national security.

And the industry itself must continue to innovate, transform, and reinvent itself to meet growing demand, foster profitability, meet competitive challenges, and improve safety.

Today you are going to hear ideas on how to strengthen the aviation system from some of the nation’s leading aviation authorities.


Right now we’re going to start with two of the smartest.

It’s my pleasure to turn things over to former Postmaster General Jack Potter—who consults for the Chamber on global supply chain issues—and Janet Kavinoky, who leads all of the Chamber’s transportation efforts.