oversight

National Airspace System: Reauthorizing FAA Provides Opportunities and Options to Address Challenges

Published by the Government Accountability Office on 2003-02-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                               United States General Accounting Office

GAO                            Testimony
                               Before the Subcommittee on Aviation,
                               Committee on Transportation and Infrastructure,
                               House of Representatives


For Release on Delivery
Expected at 2:00 p.m. EST
Wednesday, February 12, 2003   NATIONAL AIRSPACE
                               SYSTEM

                               Reauthorizing FAA
                               Provides Opportunities
                               and Options to Address
                               Challenges

                               Statement of Gerald L. Dillingham
                               Director, Civil Aviation Issues




GAO-03-473T
                                                  February 12, 2003


                                                  NATIONAL AIRSPACE SYSTEM

                                                  Reauthorizing FAA Provides
Highlights of GAO-03-473T, a testimony            Opportunities and Options to Address
before the Subcommittee on Aviation,
House Committee on Transportation and             Challenges
Infrastructure




Much has changed since the                        Funding planned airport development. Estimates vary as to the annual
Congress enacted the Wendell H.                   cost of planned airport capital development over the next 5 years, from
Ford Aviation Investment and                      FAA’s estimate of about $9 billion to the airport industry’s estimate of about
Reform Act for the 21st Century                   $15 billion. If airports continue to receive about $12 billion a year for
(AIR-21) 3 years ago—the
                                                  planned capital development—the average for 1999 through 2001—they
downturn in the nation's economy
and the terrorist attacks of                      would be able to fund all of the projects included in FAA’s estimate, but
September 11, 2001, have taken a                  would fall about $3 billion short of the industry’s estimate.
heavy toll on aviation. Competition
for federal funding has also grown.               Increasing capacity and efficiency. Recently, airports have taken about
                                                  10 years to develop runways, and ongoing runway projects are expected to
The reauthorization of AIR-21                     take even longer. The federal government and airports have taken actions to
provides an opportunity for the                   expedite runway development, but it is still too early to assess the impact of
Congress and the Federal Aviation                 these actions. FAA’s management of costly air traffic control acquisitions
Administration (FAA) to focus on                  has improved, but cost, schedule, and performance problems remain.
several challenges to improving the
national airspace system. These
                                                  Implementing human capital and procurement reforms. FAA is making
challenges include (1) funding
planned airport capital                           progress in implementing human capital and procurement reforms, but it has
development, (2) increasing                       not fully implemented a new compensation system, in part because it has to
capacity and efficiency, (3)                      negotiate with multiple unions, and it is not yet systematically evaluating the
implementing human capital and                    results of reforms in either area.
procurement reforms, and (4)
ensuring aviation safety.                         Ensuring aviation safety. The Safer Skies program, which focuses on
                                                  identifying and correcting the causes of aviation accidents, and FAA’s
This testimony is based on ongoing                redesigned program to inspect airline operations are two important aviation
and published GAO work. The                       safety initiatives. While both programs have made good starts, some
information on funding and                        challenges remain. The Safer Skies program, which began in 1998, is not fully
development, obtained from FAA
                                                  implemented, and the inspection system has encountered startup problems
and the Airport Council
International (ACI), a key                        with inspector training and guidance.
organization representing the
airport industry, is preliminary and              Past Funding Is Sufficient to Cover FAA’s Estimate but Would Fall $3 Billion Short of
therefore subject to change.                      Industry’s Estimate
                                                   Do llars in billio ns.
                                                                                                                  $15.0
                                                        16
                                                        14
                                                                                          $11.8                                         $11.8
This testimony does not contain                         12
                                                                       $9.2
recommendations. However, GAO                           10
reports containing relevant
                                                          8
recommendations are listed among
the Related GAO Products                                  6
following the testimony.                                  4
                                                          2
www.gao.gov/cgi-bin/getrpt?GAO-03-473T.                   0
                                                                Annual FAA Planned   Annual Funding          Annual ACI Planned     Annual Funding
To view the full testimony, including the scope                    Development     Received by Airport s        Development       Received by Airports
and methodology, click on the link above.
For more information, contact Gerald L.
Dillingham at (202) 512-3650 or                   Sources: FAA and ACI.
dillinghamg@gao.gov.
    Mr. Chairman and Members of the Committee:

    We are pleased to be here today to discuss issues relevant to ensuring the
    safe and efficient operation of the national airspace system. These issues
    are particularly relevant as you prepare to reauthorize the Wendell H. Ford
    Aviation Investment and Reform Act for the 21st Century (AIR-21). Much
    has changed since the Congress enacted AIR-21 3 years ago. As you know,
    the downturn in the nation’s economy and the terrorist attacks of
    September 11, 2001, have taken a heavy toll on aviation. Flights that were
    once filled are now being canceled for lack of business, and attention has
    shifted from increasing the capacity of the national airspace system to
    enhancing aviation security. Furthermore, as the federal budget deficit has
    increased, competition for federal resources has intensified.

    The Congress and the administration have responded to the public’s
    concerns about aviation security by federalizing airport screeners,
    upgrading and installing new airport screening equipment, and expanding
    the Federal Air Marshal Service. These security measures will continue to
    require and compete for federal funds. At the same time, the transfer of
    some key security responsibilities to the Transportation Security
    Administration, which recently moved to the new Department of
    Homeland Security, will allow the Federal Aviation Administration (FAA)
    to focus on the challenges it faces in improving the national airspace
    system. These challenges include (1) funding planned airport capital
    development, (2) increasing capacity and efficiency, (3) implementing
    human capital and procurement reforms, and (4) ensuring aviation safety.

    My statement today is based on our ongoing work on airport funding and
    on our published reports addressing the other challenges. Because our
    information on planned airport capital development, including the
    information we obtained from surveying 400 smaller airports, is
    preliminary, it is subject to change.

    In summary:

•   Although it is generally agreed that maintaining the integrity of the
    national airspace system requires continual funding, estimates vary as to
    the type and cost of planned airport capital development needed to ensure
    a safe and efficient system. For 2001 through 2005, FAA has estimated
    annual planned capital development costs of about $9 billion, while the
    Airport Council International (ACI), a key organization representing the
    airport industry, has estimated annual costs of about $15 billion for 2002
    through 2006. FAA’s estimate includes only projects that are eligible for

    Page 1                                   GAO-03-473T National Airspace System
    federal funding, whereas ACI’s estimate includes projects that are both
    eligible and ineligible for federal funding. Neither FAA’s nor ACI’s estimate
    covers the airport terminal modifications needed to accommodate the new
    explosives detection systems required to screen checked baggage.
    According to ACI, these modifications could cost $3 billion to $5 billion
    over the next 5 years. The Congress has not yet determined how these
    modifications will be funded. If airports continue to receive about $12
    billion a year for planned capital development—the average amount they
    received from 1999 through 2001—they would be able to fund all of the
    projects included in FAA’s estimate, but they would not be able to fund
    about $3 billion in planned development estimated by ACI. While this
    projected shortfall could change with revisions in future funding, planned
    development, or both, it nevertheless provides a useful indication of where
    funding differences may be the greatest. Options are available to increase
    or make better use of the funding for airport development, and these
    options would benefit different types of airports to varying degrees. For
    example, raising the current cap on passenger facility charges would
    primarily benefit larger airports, while increasing or redistributing Airport
    Improvement Program grant funds would be more likely to help smaller
    airports.
•   To increase the capacity and efficiency of the national airspace system,
    FAA has focused on building new runways and modernizing air traffic
    control. Results have been mixed in both areas. FAA’s Operational
    Evolution Plan, a 10-year blueprint for increasing capacity and efficiency,
    includes one new runway but notes the cancellation of another runway
    and delays in the construction of six others. Our work has identified
    challenges to runway development, including community opposition,
    environmental concerns (especially noise issues), and litigation.1 Because
    of these and other challenges, airports have taken about 10 years to plan
    and build runways, and they expect to take about 14 years for runways
    that are not yet completed. Several federal initiatives, such as an executive
    order designed to streamline the environmental review process, are
    designed to facilitate runway development, but we believe it is too early to
    assess their impact. To modernize air traffic control, FAA spends almost
    $3 billion annually, but its progress has been slow because of cost
    overruns, schedule delays, and performance shortfalls. As a result, we
    designated this area as high risk in 1995, and it remains at high risk today.
    FAA has made some progress in addressing the root causes of its



    1
    U. S. General Accounting Office, Aviation Infrastructure: Challenges Related to Building
    Runways and Actions to Address Them, GAO-03-164 (Washington, D.C.: Jan. 30, 2003).



    Page 2                                           GAO-03-473T National Airspace System
    modernization problems—by, for example, improving its cost-estimating
    and cost-accounting practices—but it has not yet determined which
    modernization technologies and initiatives are most likely to increase
    capacity and efficiency and what impact the current financial condition of
    the airline industry will have on the implementation of planned
    modernization efforts.
•   Recognizing the importance of effective human capital and acquisitions
    management to FAA’s ability to achieve its mission, the Congress
    exempted FAA from many federal human capital and acquisitions laws,
    and FAA began implementing reforms in these areas in 1996. FAA has
    made progress in implementing the reforms. However, as we reported last
    week,2 FAA has not yet finished implementing some key human capital
    management initiatives, in part because it needs to negotiate changes with
    multiple unions. FAA also lacks data on the effects of its human capital
    initiatives, indicating that it has not fully incorporated important elements
    into its human capital reform effort, including data collection and analysis,
    performance goals and measures, and links between its reform goals and
    program goals. Developing a strategic approach to human capital
    management is particularly important because FAA faces the likelihood of
    hiring thousands of air traffic controllers in the next decade to fill
    vacancies caused by retirements. To improve its procurement
    management, FAA implemented an acquisitions management system that
    is now capturing key information; however, FAA has not yet put processes
    in place to evaluate projects after implementation so that it can identify
    lessons learned and improve the investment management process.
•   Finally, FAA and the Congress have taken important steps to enhance
    aviation safety; however, some challenges remain. Safer Skies, an initiative
    designed by FAA and the aviation industry to reduce the nation’s fatal
    aviation accident rate by 80 percent by 2007, is the centerpiece of FAA’s
    efforts to improve aviation safety. The initiative was implemented in 1998
    and many preventive actions are under way but have not yet been fully
    implemented. Another key to improving aviation safety is effective
    inspections of the nation’s airline operations. In reporting on FAA’s
    redesigned Air Transportation Oversight System in 1999, we noted that it
    incorporated important features to ensure that airlines have systems to
    control risks and prevent accidents, but that it had encountered startup




    2
    U.S. General Accounting Office, Human Capital Management: FAA’s Reform Effort
    Requires a More Strategic Approach, GAO-03-156 (Washington, D.C.: Feb. 3, 2003).



    Page 3                                         GAO-03-473T National Airspace System
                          problems with inspector training and guidance.3 Many of these problems
                          were not yet fully resolved when the Department of Transportation’s
                          Inspector General reported on the inspection system last year.4 Finally, to
                          reduce the risk of accidents, the Congress enacted the Pilot Records
                          Improvement Act of 1996, which requires air carriers to review
                          information on a pilot’s performance, qualifications, and training before
                          making a final hiring decision. As we reported in 2002,5 compliance with
                          the act has improved over time, but FAA needs to update its guidance and
                          incorporate information on the act in the agency’s training for inspectors
                          so that they can more effectively monitor and enforce compliance,
                          particularly among the smaller carriers.


                          Both FAA and ACI have estimated the costs of planned airport capital
Prior Years’ Funding      development. Our analysis indicates that recent funding levels would
Levels Would Cover        cover the costs estimated by FAA, but not all the costs estimated by ACI.
                          Options for addressing the potential difference between funding and
Projects Included in      planned development estimates include increasing or reallocating Airport
FAA’s Estimate, but       Improvement Program (AIP) grant funds and removing the current cap on
                          passenger facility charges.
Not All Planned
Capital Development
FAA’s and the Airport     The estimated costs of planned airport capital development vary
Industry’s Estimates of   depending on which projects are included in the estimates. According to
Planned Capital           FAA’s estimate, which includes only projects that are eligible for AIP
                          grants, the total cost of airport development will be about $46 billion, or
Development Vary          over $9 billion per year, for 2001 through 2005. FAA’s estimate is based on
Substantially             the agency’s National Plan of Integrated Airport Systems, which FAA
                          published in August 2002. ACI’s estimate includes all of the projects in
                          FAA’s estimate, plus other planned airport capital projects that may or
                          may not be eligible for AIP grants. ACI estimates a total cost of almost $75


                          3
                           U.S. General Accounting Office, Aviation Safety: FAA’s New Inspection System Offers
                          Promise, but Problems Need to Be Addressed, GAO/RCED-99-183 (Washington, D.C.: June
                          28, 1999).
                          4
                           U.S. Department of Transportation, Office of Inspector General, Report on the Air
                          Transportation Oversight System: Federal Aviation Administration, AV-2002-088
                          (Washington, D.C.: Apr. 8, 2002).
                          5
                           U.S. General Accounting Office, Aviation Safety: Better Guidance and Training Needed
                          on Providing Files on Pilots’ Background Information, GAO-02-722 (Washington, D.C.:
                          Aug. 30, 2002).



                          Page 4                                           GAO-03-473T National Airspace System
billion, or nearly $15 billion per year, for 2002 through 2006. Projects that
are eligible for AIP grants include runways, taxiways, and noise mitigation
and noise reduction efforts; projects that are not eligible for AIP funding
include parking garages, hangars, and expansions of commercial space in
terminals.

Both FAA’s and ACI’s estimates cover projects for every type of airport. As
table 1 indicates, the estimates are identical for all but the large- and
medium-hub airports, which are responsible for transporting about 90
percent of the traveling public. ACI’s estimates are about twice as large as
FAA’s for these airports.

Table 1: Average Annual Planned Development Costs Estimated by FAA and ACI,
by Airport Type, 2001-2006

Dollars in millions
                                                             Annual average
                                                Number of
Airport type                                      airports        FAA       ACI
Large hub                                               31       4,855    8,554
Medium hub                                              37       1,073    3,109
Small hub                                               71         675      675
Nonhub                                                 280         807      807
Other commercial service                               124         142      142
Reliever                                               260         526      526
General aviation                                     2,558       1,167    1,167
Total                                                3,364       9,245   14,980
Source: FAA and ACI.


According to FAA’s analysis of the planned capital development for 2001
through 2005, airports will use (1) 61 percent of the $46 billion for capacity
enhancement, reconstruction, and modifications to bring airports up to the
agency’s design standards and (2) 39 percent to fund safety, security,
environmental, and other projects. See figure 1.




Page 5                                     GAO-03-473T National Airspace System
                         Figure 1: Distribution of FAA’s Estimated $46 Billion for Planned Capital
                         Development at Airports by Project Type, 2001-2005




                         Neither FAA’s nor ACI’s estimate includes funding for terminal
                         modification projects that are needed to accommodate the new explosives
                         detection systems. ACI estimates that terminal modifications will cost
                         about $3 billion to $5 billion over the next 5 years.


Airports Obtain Most     From 1999 through 2001, the 3,364 airports that make up the national
Funding from Bonds and   airport system received an average of about $12 billion per year for
Federal Sources          planned capital development. The single largest source of these funds was
                         bonds, followed by AIP grants and passenger facility charges. (See table
                         2.) It is important to note that the appropriated AIP funding for fiscal year
                         2002 totaled $3.2 billion and that the authorized AIP funding for fiscal year
                         2003 is $3.4 billion. However, because data for funding from other sources




                         Page 6                                         GAO-03-473T National Airspace System
were not available for these years, we used the figures from 1999 through
2001, the most recent years for which consistent data were available.

Table 2: Sources of Airport Funding

    Dollars in billions
                                     1999-2001
                                average annual Percent of
    Funding source                    fundinga      total Source of funds
                                               b
    Airport bonds                        $6.90        59 Usually, state and local
                                                          governments or airport
                                                          authorities issue tax -exempt
                                                          debt. Funds also include notes.
    Airport Improvement                   2.42c       21 The Congress makes funds
    Program grants                                        available from the Airport and
                                                          Airway Trust Fund, which
                                                          receives revenue from various
                                                          aviation-related taxes.
                                               d
    Passenger facility                    1.59        13 Funds come from passenger
    charges                                               fees of up to $4.50 per trip
                                                          segment at commercial service
                                                          airports.
                                               e
    State and local                        .44          4 Funds include state and local
    contributions                                         grants, loans, and matching
                                                          funds for AIP grants.
                                                f
    Airport revenue                         .42         4 Funds are generated from (1)
                                                          “airside” revenues derived from
                                                          the operation and landing of
                                                          aircraft, passengers, or freight
                                                          and (2) “landside” revenues
                                                          derived from concessions and
                                                          leases.
    Total                               $11.78       100
Source: GAO, FAA, and Thomson Financial.

Note: Totals may not add because of rounding.
a
    Amounts expressed in inflation-adjusted 2001 dollars.
b
 Net of refinancing. Of this total, $1.43 billion per year represented the proceeds of special facility
bonds, which are secured by revenue pledges from the indebted facility and issued on behalf of
nonairport beneficiaries, such as airlines.
c
 Since the passage of AIR-21 in 2000, annual AIP funding has been at or above $3.2 billion. Before
that, it was less than $2 billion.
d
    Airports have been eligible to charge $4.50 since fiscal year 2001. Before that, the ceiling was $3.00.
e
 Net operating revenue in excess of a minimum coverage ratio of 125 percent of the debt service
(principal and interest payments) for commercial service airports. For general aviation and reliever
airports, amounts are calculated as net operating revenue.
f
Does not include local grants and loans for commercial service airports because we found no data to
document the amounts from these sources.




Page 7                                                       GAO-03-473T National Airspace System
The amount and type of funding vary depending on the airport’s size. For
example, as shown in figure 2, the large- and medium-hub airports depend
primarily on bonds, while the smaller airports rely principally on AIP
grants. Passenger facility charges are a more important source of revenue
for the large- and medium-hub airports because they have the majority of
commercial service passengers.

Figure 2: Distribution of Sources of Funding, by Airport Type




Note: The 1999 and 2000 figures were converted to inflation-adjusted 2001 dollars.

Note: Special facility bonds are secured by the revenue from the indebted facility for projects such as
terminals, hangars, and maintenance facilities, rather than by the airport’s general revenue.

Note: Available operating revenue accounts for less than 1 percent of the capital development
funding received by smaller airports, and state and local contributions represent less than 1 percent
of the capital development funding received by large- and medium-hub airports.




Page 8                                                   GAO-03-473T National Airspace System
Prior Years’ Funding        If the funding for airport capital development remains at about $12 billion
Levels Would Cover All of   a year over the next 5 years, it would cover all of the projects in FAA’s
FAA’s Planned               estimate. However, it would be about $3 billion less per year than ACI’s
                            estimate. Figure 3 compares the average annual funding airports received
Development Estimate but    from 1999 through 2001 with FAA’s and ACI’s annual planned development
Would Fall About            for 2001 through 2006. This difference is not an absolute predictor of
$3 Billion Short of ACI’s   future funding shortfalls; both funding and planned development may
Estimate                    change in the future. However, it does provide a useful indication of where
                            funding differences may be the greatest.

                            Figure 3: Recent Average Annual Funding Compared with Estimates of Annual
                            Planned Development Costs




Funding Difference Would    The difference between past funding and planned development is
Affect Smaller Airports     proportionally greater for smaller airports than for large- and medium-hub
Proportionally More Than    airports. If the smaller airports were to continue to receive an average of
                            about $2.4 billion per year, they would be able to fund about 73 percent of
Larger Airports, but        the estimated cost of their total planned development. In comparison,
Difference Has Narrowed     large- and medium-hub airports would be able to fund about $9.4 billion
                            per year, or about 80 percent, of the estimated cost of their total planned
                            development. It is important to note that while the airlines may be


                            Page 9                                    GAO-03-473T National Airspace System
experiencing financial problems, most large airports have very solid credit
ratings and could, if necessary, issue more debt without facing exorbitant
interest rates. Figures 4 and 5 illustrate the differences between funding
levels and estimated planned capital development at smaller and at large-
and medium-hub airports.

The primary reason that smaller airports would be able to fund 73 percent
of their planned development, rather than the 52 percent reported we
reported in 1998, is that they have benefited significantly from the
increases in AIP grants, which is a larger source of funding for smaller
airports than it is for larger airports. Of the $2.4 billion in AIP grant funds
that airports received each year, on average, from 1999 through 2001,
smaller airports received almost 63 percent, whereas large- and medium-
hub airports received about 37 percent. Smaller airports have received an
increasing share of AIP grants primarily because of statutorily required
changes in the distribution of these funds. For example, in AIR-21, the
Congress increased the funding for two categories that primarily or
exclusively benefit small airports—the state apportionment fund and the
small airport fund—and created general aviation entitlement grants, which
also benefit smaller airports.6




6
 It is also important to note that if we replaced the AIP figures for 1999 through 2001 with
the AIP figures appropriated for fiscal year 2002 and authorized for fiscal year 2003 in our
analysis, assuming no changes in the distribution of AIP funds, smaller airports would be
able to cover even more of the estimated cost of their planned development because AIP
grant funds for fiscal years 2002 and 2003 are about $1 billion more than the average annual
AIP funding for 1999 through 2001. Because data for funding from other sources were not
available for these years, we used the figures for 1999 through 2001, the most recent years
for which consistent data were available.



Page 10                                            GAO-03-473T National Airspace System
Figure 4: Average Annual Funding Compared with Estimated Annual Planned
Capital Development for Smaller Airports




Page 11                                   GAO-03-473T National Airspace System
                           Figure 5: Average Annual Funding Compared with Estimated Planned Capital
                           Development for Large- and Medium-Hub Airports




                           Note: The total for average annual funding may not add because of rounding.




Options Are Available to   Options are available to increase airport funding or to make better use of
Address Difference         the existing funding. These options, some of which were authorized or
between Funding and        implemented as part of AIR-21, include increasing the AIP grant funding
                           for smaller airports, increasing passenger facility charges, and using
Planned Development        innovative financing approaches. The various options would benefit
                           different types of airports to varying degrees.

                           To help address the difference between funding and planned development,
                           AIR-21 provided that up to $150,000 a year in AIP grant funds be made
                           available to all general aviation airports for up to 3 years for airfield capital
                           projects such as runways, taxiways, and airfield construction and
                           maintenance projects. In our report issued yesterday, we reported that
                           since the program’s inception in fiscal year 2001, general aviation airports




                           Page 12                                               GAO-03-473T National Airspace System
have received a total of about $325 million, which they have used primarily
to help build runways, purchase navigational aids, and maintain
pavements and airfield lighting.7 Most of the state aviation officials and
general aviation airport managers we surveyed said the grants were useful
in meeting their needs, and some suggested that the $150,000 grant limit be
increased so that general aviation airports could undertake larger projects.
However, a number of state officials cautioned that an increase in the
general aviation entitlement grant could cause a decrease in the state
apportionment fund, which states use to address their aviation priorities.

Another option would be to increase or eliminate the cap on passenger
facility charges. This option would primarily benefit larger airports,
because passenger facility charges are a function of the volume of
passenger traffic. However, under AIP, airports that collect passenger
facility charges must forfeit a certain percentage of their AIP formula
funds. These funds are subsequently divided between the small airport
fund, which is to receive 87.5 percent, and the discretionary fund, which is
to receive 12.5 percent. Thus, smaller airports would benefit indirectly
from any increase in passenger facility charges. In our 1999 report on
passenger facility charges,8 we estimated that a small increase in
passenger facility charges would have a modest effect on passenger traffic.
At that time, we estimated that each $1 increase would reduce passenger
levels by about 0.5 to 1.8 percent, with a midrange estimate of 0.85
percent. Since AIR-21 raised the cap on passenger facility charges from
$3.00 to $4.50, the full effect of the increase has not been realized because
only 17 of the 31 large-hub airports (55 percent) and 11 of the 37 medium-
hub airports (30 percent) have increased their rates to $4.50. Additionally,
3 large-hub airports and 6 medium-hub airports do not charge a passenger
facility fee. The reluctance to raise passenger facility charges is likely to be
the result of several factors, including the views of airlines, which are
opposed to any increase in passenger facility charges because an increase
would raise passenger costs and reduce passenger traffic. Nonetheless, if
all airports were to increase passenger facility charges to the current
ceiling, additional revenue could be generated.




7
 U.S. General Accounting Office, Aviation Finance: Implementation of General Aviation
Entitlement Grants, GAO-03-347 (Washington, D.C.: Feb. 11, 2003).
8
 U.S. General Accounting Office, Passenger Facility Charges: Program Implementation
and the Potential Effects of Proposed Changes, GAO/RCED-99-138 (Washington, D.C.: May
19, 1999).



Page 13                                        GAO-03-473T National Airspace System
FAA has introduced other mechanisms to make better use of existing
funding sources, the most successful of which has been letters of intent, a
tool that has effectively leveraged private sources of funding. A letter of
intent represents a nonbinding commitment from FAA to provide
multiyear funding to an airport beyond the current AIP authorization
period. Thus, the letter allows the airport to proceed with a project
without waiting for a future AIP grant because the airport and investors
know that allowable costs are likely to be reimbursed. A letter of intent
may also enable an airport to receive a more favorable interest rate on
bonds that are sold to refinance a project because the federal government
has indicated its support for the project. FAA has issued 64 letters of intent
with a total commitment of about $3 billion; large- and medium-hub
airports account for the majority of the total.

Other approaches to making better use of existing funding resources were
authorized under AIR-21. Specifically, the act authorized FAA to continue
its innovative finance demonstration program, which is designed to test
the ability of innovative financing approaches to make more efficient use
of AIP funding. Under this program, FAA enabled airports to leverage
additional funds or lower development costs by (1) permitting flexible
local matching on some projects, (2) purchasing commercial bond
insurance, (3) paying interest costs on debt, and (4) paying principal and
interest debt service on terminal development costs incurred before the
enactment of AIR-21. FAA has provided about $31 million for smaller
airports to test these innovative uses of AIP funding. According to FAA
officials, the results of the program have been mixed. The most popular
option for airports has been flexible matching, which has resulted in
several creative loan arrangements.




Page 14                                    GAO-03-473T National Airspace System
                       Ensuring the efficient operation of the national airspace system is an
Improvements in        important reauthorization issue that is vital to improving mobility and
Capacity and           supporting economic growth. Despite the overall decline in air traffic since
                       September 11, demand is gradually increasing, and at some airports,
Efficiency Will Be     especially those in the Midwest, recovery is progressing more rapidly. To
Needed to Meet         avoid the congestion and delays that plagued air traffic before September
                       11, FAA, airlines, and airports are continuing to pursue capacity-enhancing
Future Demand          efforts, such as building new runways, making more efficient use of
                       existing capacity, and better managing the acquisition of air traffic control
                       technology. Figure 6 illustrates congestion at a major airport.

                       Figure 6: Aircraft Lined Up to Take Off




FAA’s Operational      In December 2002, FAA published the most recent version of its
Evolution Plan         Operational Evolution Plan, a 10-year plan to increase the capacity and
Encompasses Capacity   efficiency of the national airspace system, primarily by focusing on
                       building runways. If successfully carried out, the plan would substantially
and Efficiency         increase capacity and improve efficiency. However, FAA faces several
Improvements           challenges in implementing the plan. First, the success of the plan depends
                       on adequate funding and on the consensus of FAA’s aviation industry
                       partners. Yet according to the most recent version of the plan, the timing


                       Page 15                                   GAO-03-473T National Airspace System
                          and implementation of some activities may be in jeopardy because of the
                          current economic situation and the uncertain viability of some industry
                          participants. For example, the plan calls for the airline industry to invest
                          $11 billion in new equipment for aircraft. FAA is currently reviewing the
                          ability of the airlines to make this investment. Second, as noted, the plan
                          relies heavily on runway development to increase capacity, but the most
                          recent version reports mixed results in building new runways. While the
                          plan indicates that one new runway will be built, it points out that another
                          runway has been cancelled and the construction of six additional runways
                          has been delayed because of local situations. Furthermore, building new
                          runways would be difficult at several of the most delay-prone airports,
                          such as La Guardia, Newark, Kennedy, Los Angeles, and San Francisco,
                          because these airports either are out of room or would face intense local
                          opposition. Persistent delays at key airports such as these will continue to
                          create “choke points” that slow air traffic throughout the system. In
                          addition, AIR-21 requires the phaseout of slot restrictions at Chicago
                          O’Hare by July 1, 2002, and at LaGuardia and John F. Kennedy airports by
                          2007. Because slot restrictions limit the number of gates at an airport, their
                          phaseout could lead to an increase in air traffic. According to the
                          Operational Evolution Plan, FAA is undertaking a number of efforts to
                          address problems at choke points, such as rerouting aircraft and adding
                          technology.


Building Runways Is       Our work has found that airports face many of the same challenges and
Challenging and Takes a   delays in building new runways that FAA reported in the Operational
Long Time                 Evolution Plan. In January 2003, we reported that airports spent about 10
                          years planning and building recently completed runways and expect to
                          spend about 14 years on runways that are not yet completed.9 Several
                          external factors affect how much time is spent planning and building
                          runways, and several airports with unfinished runway projects identified
                          significant challenges that had delayed their projects’ completions. While
                          many airports believed that completing the environmental review phase
                          was a significant challenge, they also described other phases of the
                          runway development process as equally challenging. For example, airport
                          officials in Los Angeles and Boston said that they faced significant
                          challenges in reaching agreement with community interest groups during
                          the planning phase. In Boston, differences with these groups have led to



                          9
                          U. S. General Accounting Office, Aviation Infrastructure: Challenges Related to Building
                          Runways and Actions to Address Them, GAO-03-164 (Washington, D.C.: Jan. 30, 2003).



                          Page 16                                          GAO-03-473T National Airspace System
    lengthy litigation. Other airports said that mitigating the potential impact
    of aircraft noise on the surrounding community continues to be a
    challenge because of heightened community concerns about noise.

    Although there may be no single solution to all of the issues involved in
    planning and building runways, the federal government and airport
    authorities have taken some actions. For example, a recent executive
    order is designed to streamline the environmental review of transportation
    infrastructure projects. In addition, FAA has taken several actions to
    increase communication and coordination and streamline the planning
    and environmental review of runway projects. Some airports said these
    actions could help airports resolve challenges more quickly; however, we
    believe it is too early to assess the impact of these actions on the runway
    development process.

    Our work has shown that airports have also tried to address the challenges
    in building runways by, for example, involving local stakeholders, such as
    community groups, at the beginning of the process and reaching early
    agreement on how to mitigate the adverse effects of runway projects.
    Airports said these efforts helped to facilitate the completion of their
    projects and could be useful for other airports considering runway
    projects. However, the variety of situations that airports described and the
    different levels of challenges they face make it difficult to generalize from
    one airport’s experience to another’s.

    Recognizing that building new runways is not always a practicable way to
    increase capacity at some airports, we identified three alternatives to
    building runways:10

•   Add capacity by using nearby airports that have available capacity or by
    building new airports.
•   Find ways to manage and distribute demand within the system’s existing
    capacity by, for example, limiting the number of takeoffs and landings
    during peak periods or limiting the ability of aircraft, other than those
    operated by airlines, to use especially crowded or sensitive airports (under
    current law, all aircraft have equal access to even the largest airports).




    10
     U.S. General Accounting Office, National Airspace System: Long-Term Capacity
    Planning Needed Despite Recent Reduction in Flight Delays, GAO-02-185 (Washington,
    D.C.: Dec. 14, 2001).



    Page 17                                        GAO-03-473T National Airspace System
                       •   Develop other modes of intercity travel, such as high-speed rail, where
                           metropolitan areas are relatively close, to form an integrated, intermodal
                           transportation network.

                           These alternatives would require extensive change, could conflict with the
                           interests of one or more key stakeholder groups, and would often be
                           costly. Nevertheless, they may be essential to accommodate expected
                           increases in the demand for efficient transportation services or to address
                           security and other concerns prompted by the terrorist attacks. To facilitate
                           their implementation, we believe that the federal government will need to
                           assume a central role. Accordingly, we have recommended that the
                           Department of Transportation (DOT) begin a more extensive evaluation of
                           initiatives to address flight delays, including intermodal solutions and a
                           dialogue with the aviation community and other transportation
                           stakeholders as a basis for developing a comprehensive blueprint for
                           addressing the nation’s long-term transportation needs. DOT has
                           recognized the need for more and better long-range planning on the
                           potential use of such measures, but its efforts are in the beginning stages.
                           The current hiatus in air traffic growth creates an opportunity for such
                           planning to take place.


FAA’s Air Traffic          To increase the safety, capacity, and efficiency of the national airspace
Modernization Effort       system, FAA undertook a major effort in 1981 to modernize and replace
Remains High Risk          aging air traffic control equipment. This effort has been plagued by cost
                           overruns, schedule delays, and performance shortfalls. In 1995, we
                           designated it as high risk, and we continue to designate it as such.11
                           Inefficiencies in the air traffic control system contributed to some of the
                           delays in the system that peaked in 2000. At that time, FAA estimated that
                           modernizing equipment along with other changes, such as redesigning the
                           airspace, would increase capacity by 5 to 15 percent.

                           Originally, FAA planned to complete its modernization in 10 years at a cost
                           of $12 billion. Now, two decades and $35 billion later, FAA estimates that
                           it will need nearly $16 billion more through fiscal year 2007 to complete
                           key projects, including the Standard Terminal Automation Replacement
                           System (STARS), the Wide Area Augmentation System (WAAS), the Next-
                           Generation Air/Ground Communications (NEXCOM), the Local Area



                           11
                            U.S. General Accounting Office High-Risk Series: An Update, GAO-03-119 (Washington,
                           D.C.: Jan 2003).



                           Page 18                                        GAO-03-473T National Airspace System
                                             Augmentation System (LAAS), the Integrated Terminal Weather System
                                             (ITWS), and free flight initiatives, which FAA’s Operational Evolution Plan
                                             recognizes as a new way of managing air traffic that is expected to help
                                             lower costs for the airlines and help the aviation system accommodate
                                             more flights.

                                             While FAA is making progress in managing the air traffic control
                                             modernization, key programs continue to experience cost, schedule, and
                                             performance problems. As a result, resources have not been spent cost-
                                             effectively and improvements in capacity and efficiency have been
                                             delayed. Table 3 shows the status of three major programs that we have
                                             been monitoring.

Table 3: Selected Air Traffic Control Modernization Acquisition Projects

                                  Estimated                      Projected deployment
                                    cost                                schedule
 Project               Original        Current              Original         Current         Status
 Standard Terminal     $940 million    $1.33 billion        Start: 1998      Start: 2002     FAA’s latest cost and schedule for
 Automation                                                 Finish: 2005     Finish: 2005    STARS is based on acquisition of 74
 Replacement                                                                                 systems, as opposed to the original
 System (STARS),                                                                             172 systems. In September 2002, we
 designed to replace                                                                         found that FAA’s schedule for
 aging displays and                                                                          deploying STARS to a large facility
 processing systems                                                                          presents challenges in terms of
 used by air traffic                                                                         completing efforts to test the system,
 controllers                                                                                 resolve problems, and train all
                                                                                             employees on the new system.a
 Wide Area             $892 million    $2.9 billion         Start: 1998      Start: 2003     Integrity concerns have plagued
 Augmentation                                               Finish: 2001     Finish: to be   WAAS’s development. While the
 System (WAAS),                                                              determined      agency has made progress in
 designed to provide                                                                         resolving these, FAA must decide
 satellite-based                                                                             whether to stop WAAS’s development
 navigation for                                                                              in 2003 or continue to refine the
 airspace users                                                                              technology to provide an approach
                                                                                             capability with greater precision.
 Next-Generation       $986 million    $986 million         Finish: 2009     Finish: 2013    FAA is only in the early stages of
 Air/Ground            (1st segment    (1st segment                                          making a final decision to select the
 Communications        only)           only)                                                 technology for NEXCOM and still
 (NEXCOM),                                                                                   needs to address three major issues:
 designed to replace                                                                         whether (1) the preferred technology is
 existing                                                                                    technically sound and will operate as
 communications                                                                              intended, (2) the preferred technology
 systems and                                                                                 and equipment it requires can be
 provide additional                                                                          certified as safe for use in the national
 voice channels                                                                              airspace system, and (3) it is cost-
                                                                                             effective for users and the agency.
                                             Source: FAA.

                                             Note: Dollars are nominal.



                                             Page 19                                         GAO-03-473T National Airspace System
    a
    U.S. General Accounting Office, National Airspace System: Status of FAA’s Standard Terminal
    Automation Replacement System, GAO-02-1071 (Washington, D.C.: Sept. 17, 2002).


    DOT’s Inspector General has noted similar problems with the Local Area
    Augmentation System—a new precision approach and landing system that
    is expected to boost airport arrival rates under all weather conditions—
    and the Integrated Terminal Weather System—which provides enhanced
    weather information. FAA planned to begin operating the Local Area
    Augmentation System in 2004, but it will not meet that milestone because
    of additional development work, changing requirements, and unresolved
    safety certification issues. In addition, the estimated production costs for
    the Integrated Terminal Weather System, originally expected to be about
    $286 million, have tripled.12

    Our work has also identified free flight implementation issues. Free flight
    is a new approach to air traffic management that replaces highly
    structured rules and procedures with a more flexible system based on
    collaboration between air traffic controllers and pilots. The use of new
    free flight technologies and procedures is expected to increase the
    efficiency and capacity of the airspace system and help to avoid gridlock
    by improving operations in various segments of flight. In 2001, we made
    several recommendations to improve the implementation of free flight,
    including improving training for air traffic controllers and establishing
    detailed tracking of costs, schedules, and benefits.13 FAA has begun to
    address our recommendations. However, several outstanding issues
    remain. For example, the airlines are not likely to voluntarily equip their
    fleets with new technologies to support free flight until their business
    improves.

    Since 1995, we have made over 30 recommendations to address the root
    causes of FAA’s modernization problems. Although FAA has made
    progress in addressing these root causes, more remains to be done,
    including the following:

•   Improve immature software capabilities. FAA has developed an integrated
    framework for improving its software acquisition, software development,


    12
     DOT Office of Inspector General, Top Management Challenges, PT-2003-012
    (Washington, D.C.: Jan. 21, 2003).
    13
     U.S. General Accounting Office, National Airspace System: Free Flight Tools Show
    Promise, But Implementation Challenges Remain, GAO-01-932 (Washington, D.C.: Aug.
    31, 2001).



    Page 20                                              GAO-03-473T National Airspace System
    and systems engineering processes. In addition, FAA has continued to
    increase the number of system development projects that use this
    integrated framework. However, FAA still does not require all systems to
    achieve a minimum level of progress within the framework before being
    funded.
•   Improve cost-estimating and cost-accounting practices. FAA has
    developed a standard work breakdown structure and established an
    historical database for tracking systems’ estimated costs and other
    information. Furthermore, FAA has made progress in implementing its
    cost-accounting system. However, the agency has not yet fully instituted
    rigorous cost-estimating practices—that is, FAA is not yet incorporating
    actual costs from related system development efforts in its processes for
    estimating the costs of new projects. Most recently, we reported that the
    cost estimates for the Standard Terminal Automation Replacement System
    are unreliable because FAA did not follow its own acquisition guidance.14
•   Change organizational culture. FAA issued an organizational culture
    framework in 1997 and is working to implement it. However, in 2000, the
    DOT Inspector General followed up on problems that we first identified in
    199615 and reported that FAA’s culture remains a barrier to successful
    acquisition project management and that integrated teams, a key
    mechanism to deliver more cost-effective and timely products, are not
    working well because FAA’s culture continues to operate in vertical
    “stovepipes,” which conflict with the horizontal structure of team
    operations. Our 2000 report on the Wide Area Augmentation System also
    found that the integrated teams were not working as intended.16 We found
    that competing priorities between two key organizations that are part of
    the system’s integrated team negated the effectiveness of the team’s
    approach for meeting FAA’s goals for the system.

    As FAA moves forward with modernization in the current economic
    climate, it will be important for the agency to ensure that it is spending its
    resources on the projects that will provide the most return. This may



    14
     U.S. General Accounting Office, National Airspace System: Better Cost Data Could
    Improve FAA’s Management of the Standard Terminal Automation Replacement System,
    GAO-03-343 (Washington, D.C.: Jan. 31, 2003).
    15
      U.S. General Accounting Office, Aviation Acquisition: A Comprehensive Strategy Is
    Needed to Cultural Change at FAA, GAO/RCED-96-159 (Washington, D.C.: Aug. 22, 1996).
    16
     U.S. General Accounting Office, National Airspace System: Persistent Problems in
    FAA’s New Navigation System Highlight Need for Periodic Reevaluation,
    GAO/RCED/AIMD-00-130 (Washington, D.C.: June 12, 2000).



    Page 21                                         GAO-03-473T National Airspace System
                          require reprioritizing projects in the agency’s investment portfolio,
                          cooperating more closely with private industry to leverage federal dollars
                          and share the risk of investments, and seeking other opportunities to
                          reduce costs and operate more efficiently. Such activities would be under
                          the purview of the Air Traffic Services Subcommittee and the chief
                          operating officer, a position created by AIR-21 to oversee the air traffic
                          control system and FAA’s modernization program. However, FAA has not
                          yet hired a chief operating officer to direct these efforts.

                          As problems with the air traffic control modernization program mounted
FAA Is Implementing       in the early 1990s, FAA attributed the delays in implementing air traffic
Human Capital and         control projects, at least in part, to burdensome governmentwide human
                          capital rules and federal acquisition regulations that impeded its ability to
Procurement Reforms       hire, train, and deploy personnel and to acquire equipment and systems. In
                          response to these claims, the Congress exempted FAA from many federal
                          laws governing human capital and acquisitions, and the agency began
                          implementing human capital and procurement reforms in 1996.


Human Capital Reforms     As we reported last week, FAA has implemented the majority of its human
Have Not Been Fully       capital reform initiatives, but it has not yet completed this effort. (Fig. 7
Implemented, Evaluated,   shows the status of several key initiatives.) For example, it has not
                          implemented a new compensation system for about 20 percent of its
or Linked to Goals        50,000 employees—those staff whose unions have not reached agreements
                          with FAA. Among the factors affecting FAA’s progress in implementing
                          this initiative were the wide range of skills represented in FAA’s workforce
                          and the multiple unions representing FAA employees.




                          Page 22                                   GAO-03-473T National Airspace System
Figure 7: Implementation Status of Selected FAA Personnel Reform Initiatives




FAA has not developed data to assess the effects of its human capital
reforms. For example, it has not systematically surveyed managers and
employees or analyzed their views on the new compensation system.
Although FAA human capital officials cited positive effects of the system,
nearly two-thirds (110 out of 176) of the managers and employees we
interviewed disagreed or strongly disagreed that the new system is fair to
all employees.

The lack of data on the effects of its human capital reforms is an indication
that FAA has not fully incorporated elements that are important to
effective human capital management into its overall reform effort. These
elements include data collection and analysis, performance goals and
measures, and links between reform goals and program goals. Evaluations
of FAA’s human capital reforms have cited these shortcomings, but FAA
has not developed specific steps and time frames for building the missing
elements into its human capital management and for using these elements
to evaluate the effects of its initiatives, make strategic improvements, and
hold the agency’s leadership accountable.

Addressing these weaknesses and developing a more strategic approach to
its human capital reforms is particularly important as FAA faces the
likelihood of hiring thousands of air traffic controllers in the next decade
to replace retiring controllers. While the exact number and timing of the
controllers’ departures is impossible to determine, FAA’s and our analyses


Page 23                                      GAO-03-473T National Airspace System
show that the attrition rate will grow substantially in the near and long
term as thousands of controllers hired over a 3- to 4- year period in the
1980s become eligible to retire. In June 2002, we reported that FAA’s
strategy for replacing controllers was generally to hire new controllers
only when current, experienced controllers leave—an approach that
makes it challenging to ensure that well-qualified new controllers are
available when needed.17 For example, we found that FAA’s hiring process
did not adequately take into account the time needed to fully train
replacements, which could take up to 5 years; there was uncertainty about
agency’s tools for screening and testing the aptitude of applicants; and the
agency had not addressed the resources that may be needed to train these
replacements. We recommended, among other things, the development of
a comprehensive workforce strategy to address FAA’s impending
controller needs. While FAA has made some changes in this area since our
report appeared, it remains to be seen whether the agency’s actions will be
sufficient to ensure that qualified new controllers are available when
needed. Figure 8 shows an air traffic controller monitoring and handling
air traffic.




17
 U.S. General Accounting Office, Air Traffic Control: FAA Needs to Better Prepare for
Impending Wave of Controller Attrition, GAO-02-591 (Washington, D.C.: June 14, 2002).



Page 24                                         GAO-03-473T National Airspace System
                            Figure 8: Air Traffic Controller




FAA’s Procurement           As part of its procurement reforms, FAA introduced an acquisition
Reforms Have Improved       management system to reduce the time and cost to deploy new products
Investment Management       and services. In 1999, we found that while this was a good first step in
                            establishing a structured investment management approach for selecting
Processes, but Weaknesses   and controlling the agency’s investments, the system had weaknesses in its
Remain                      selection, control, and evaluation phases that impeded FAA’s ability to
                            manage its investments effectively and make sound decisions about
                            continuing, modifying, or canceling projects.18 We concluded that
                            correcting these weaknesses would increase the likelihood that FAA’s
                            projects would meet established cost and schedule objectives and
                            contribute to measurable improvements in the agency’s mission
                            performance, and we made several recommendations designed to improve
                            the agency’s selection, control, and evaluation of its information
                            technology investments.



                            18
                             U.S. General Accounting Office, Air Traffic Control: FAA’s Modernization Investment
                            Management Approach Could Be Strengthened, GAO/RCED/AIMD-99-88 (Washington, D.C.
                            Apr. 30, 1999).


                            Page 25                                       GAO-03-473T National Airspace System
                          Recently, we found that FAA has improved its investment management
                          processes, but that more remains to be done. For example, FAA is now
                          overseeing investment risks and capturing key information from the
                          investment selection process in a management information system. FAA
                          has also developed guidance for validating costs, benefits, and risks, and
                          expects to finalize this guidance by early 2003. However, FAA has not yet
                          implemented processes for evaluating projects after implementation in
                          order to identify lessons learned and improve the investment management
                          process. Because its procurement reform effort is not complete, major
                          projects continue to face challenges that could affect their costs, schedule,
                          and performance.


                          Safety has always been and continues to be FAA’s highest priority. FAA
FAA Is Making             has taken a number of important steps to improve aviation safety;
Progress in               however, planning and implementation could be more effective in some
                          cases.
Implementing Safety
Initiatives
FAA and Industry Have     Reducing fatal aviation accidents is key to improving aviation safety.
Taken Actions to Reduce   FAA’s centerpiece for reaching this goal is Safer Skies, an initiative that
the Fatal Accident Rate   dates back to 1998, when FAA and aviation industry representatives
                          worked together to identify the major causes of fatal accidents and to
                          design and implement preventive actions. Safer Skies is intended to reduce
                          the fatal accident rate for commercial aviation by 80 percent and to reduce
                          the number of fatal accidents for general aviation to 350 by 2007.19 Because
                          many preventive actions have not yet been fully implemented, it may be
                          too early to assess their effectiveness. Achieving the initiative’s goals will
                          require FAA to systematically implement these preventive actions and to
                          maintain good data to monitor their progress and evaluate their
                          effectiveness. As of last week, 44 preventive actions had been
                          undertaken—of which 16 are completed and 28 are under way, according
                          to FAA.




                          19
                            Commercial aviation includes both large air carrier operations and smaller commuter
                          operations. General aviation includes a wide variety of aircraft, ranging from corporate jets
                          to small piston-engine aircraft as well as helicopters, gliders, and aircraft used in
                          operations such as firefighting and agricultural spraying.



                          Page 26                                            GAO-03-473T National Airspace System
FAA’s New Safety             Improving the effectiveness of FAA’s inspections of airline operations is
Inspection System Offers     key to improving aviation safety. The FAA Administrator has noted that
Promise, but Problems        perhaps the greatest support the agency can provide to the industry is a
                             robust safety oversight role that will not waver in difficult times. FAA’s
Still Need to Be Addressed   new inspection program, the Air Transportation Oversight System, is
                             central to this oversight role. The program aims to ensure not only that
                             airlines comply with FAA’s safety requirements but also that they have
                             operating systems to control risks and prevent accidents. We found that
                             FAA had not completed many critical steps, such as developing guidance
                             and creating usable databases to capture information, before
                             implementing the new inspection system in 1998. As a result, the agency’s
                             ability to conduct effective inspections remains limited. FAA has begun to
                             address some of these problems. However, according to a 2002 review by
                             the DOT Inspector General, many of the problems persist, and the
                             program’s implementation remains inconsistent because FAA has not
                             established strong oversight and accountability procedures.20 These
                             problems limit FAA’s ability to conduct more systematic, structured
                             inspections; analyze the resulting data to identify safety trends; and target
                             its resources to the greatest aviation safety risks.


Better Implementation and    Finally, the Congress has endeavored to keep unsafe pilots out of the
Monitoring of                cockpits of commercial aircraft by requiring that carriers perform
Requirements to Perform      preemployment checks on pilot applicants. We found that carriers have
                             increasingly requested the required records since the Pilot Records
Preemployment Checks on      Improvement Act took effect in 1997. In 2000, nearly half of the nation’s
Pilots Could Enhance         large commercial airlines reported deciding not to hire pilots because of
Aviation Safety              this information. However, our data analyses and surveys of carriers
                             showed that a few carriers did not request all required records. In a few
                             cases, hiring carriers reported never receiving the records. Delays in
                             providing the records can be costly for both carriers and pilots because
                             the carrier is not allowed to use the pilot to fly passengers or cargo until
                             the records have been received. In addition, because FAA did not update
                             its guidance when the law was amended, carriers and pilots lack
                             awareness of some provisions, and FAA inspectors are not prepared to
                             review compliance. In response to our recommendations, FAA has




                             20
                              U.S. Department of Transportation, Office of Inspector General, Report on the Air
                             Transportation Oversight System: Federal Aviation Administration, AV-2002-088
                             (Washington, D.C.: Apr. 8, 2002).



                             Page 27                                          GAO-03-473T National Airspace System
              updated its guidance and is taking additional steps to better inform
              carriers, pilots, and inspectors of the law’s requirements.


              In conclusion, Mr. Chairman, the aviation industry and the national
              economy are still struggling to recover their health. Analysts nonetheless
              expect the demand for air travel to rebound, and the nation’s aviation
              system must be ready to accommodate the projected growth safely and
              securely. Sustaining recent funding levels for planned capital development
              should allow the majority of airport capital improvements to move
              forward, but it will not address the costly terminal modifications needed
              to accommodate explosives detection systems. Options such as additional
              federal grant funding or increases in passenger facility charges could make
              more funding available for airport improvements; however, competition
              for federal budget dollars and concerns about the impact of higher charges
              on airline ticket sales may limit the practicality of these options.

              Enhancing the capacity and efficiency of the national airspace system
              through runway development and air traffic modernization is critical to
              preparing for the projected growth in demand for air travel. Today, we
              have a window of opportunity to prepare for this growth without the
              pressures of congestion and flight delays. Yet we also face public and
              private constraints on spending that require us to accomplish these
              improvements as efficiently as possible. Setting priorities among projects,
              identifying opportunities for streamlining the runway development
              process, and fully implementing human capital and procurement reforms
              should help to ensure efficiency. Finally, moving forward with aviation
              safety initiatives is essential to restore and maintain the public’s
              confidence in air travel.


              To determine how much planned development would cost over the next 5
Scope and     years, we obtained planned development data from FAA and ACI. ACI
Methodology   provided its estimate to us in January 2003, and we are still analyzing the
              data on which the estimate is based. To determine the sources of airport
              funding, we obtained capital funding data from FAA, the National
              Association of State Aviation Officials, Thomson Financial, and a survey
              we conducted of 400 general aviation and reliever airports. We obtained
              funding data from 1999 through 2001, because they were the most recent
              years for which consistent data were available. We screened the planned
              development and funding data for accuracy and compared funding
              streams across databases where possible. We also clarified ambiguous
              development or funding source information directly with airports. We did

              Page 28                                   GAO-03-473T National Airspace System
                      not, however, audit how the databases were compiled, except for our own
                      survey. However, we have not finished analyzing our survey data, and the
                      results presented in this testimony are still preliminary.

                      We performed our work from May 2002 through February 2003 in
                      accordance with generally accepted government auditing standards.

                      This concludes my statement. I would be pleased to answer any questions
                      you or other members of the Committee might have.


                      For further information on this testimony, please contact Gerald
Contact Information   Dillingham at (202) 512-2834. Individuals making key contributions to this
                      testimony include Jon Altshul, Bonnie Beckett, Tammy Conquest, Howard
                      Cott, Elizabeth Eisenstadt, James Geibel, Charles D. Ireland, Edward
                      Laughlin, David Lehrer, Maren McAvoy, Matthew Sakrekoff, John W.
                      Shumann, Teresa Spisak, Richard Swayze, Larry Thomas, and Alwynne
                      Wilbur.




                      Page 29                                  GAO-03-473T National Airspace System
Related GAO Products


             Aviation Finance: Implementation of General Aviation Entitlement
             Grants. GAO-03-347. Washington, D.C.: February 11, 2003.

             Human Capital Management: FAA’s Reform Effort Requires a More
             Strategic Approach. GAO-03-156. Washington, D.C.: February 3, 2003.

             National Airspace System: Better Cost Data Could Improve FAA’s
             Management of the Standard Terminal Automation Replacement
             System. GAO-03-343. Washington, D.C.: January 31, 2003.

             Aviation Infrastructure: Challenges Related to Building Runways and
             Actions to Address Them. GAO-03-164. Washington, D.C.: January 30,
             2003.

             High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January
             2003.

             Air Traffic Control: Impact of Revised Personnel Relocation Policies Is
             Uncertain. GAO-03-141. Washington, D.C.: October 31, 2002.

             Airport Finance: Using Airport Grant Funds for Security Projects Has
             Affected Some Development Projects. GAO-03-27. Washington, D.C.:
             October 15, 2002.

             National Airspace System: Status of FAA’s Standard Terminal
             Automation Replacement System. GAO-02-1071. Washington, D.C.:
             September 17, 2002.

             Options to Enhance the Long-term Viability of the Essential Air Service
             Program. GAO-02-997R. Washington, D.C.: August 30, 2002.

             Aviation Safety: Better Guidance and Training Needed on Providing
             Files on Pilots’ Background Information. GAO-02-722. Washington, D.C.:
             August 30, 2002.

             Air Traffic Control: FAA Needs to Better Prepare for Impending Wave of
             Controller Attrition. GAO-02-591. Washington, D.C.: June 14, 2002.

             Aviation Finance: Distribution of Airport Grant Funds Complied with
             Statutory Requirements. GAO-02-283. Washington, D.C.: April 30, 2002.




             Page 30                                 GAO-03-473T National Airspace System
Department of Transportation, Transportation Security
Administration: Aviation Security Infrastructure Fees. GAO-02-484R.
Washington, D.C.: March 11, 2002.

Applying Agreed-Upon Procedures: Airport and Airway Trust Fund
Excise Taxes. GAO-02-380R. Washington, D.C.: February 15, 2002.

National Airspace System: Long-Term Capacity Planning Needed
Despite Recent Reduction in Flight Delays. GAO-02-185. Washington,
D.C.: December 14, 2001.

Air Traffic Control: FAA Enhanced the Controller-in-Charge Program,
but More Comprehensive Evaluation Is Needed. GAO-02-55. Washington,
D.C.: October 31, 2001.

National Airspace System: Free Flight Tools Show Promise, but
Implementation Challenges Remain. GAO-01-932. Washington, D.C.:
August 31, 2001.

Air Traffic Control: Role of FAA’s Modernization Program in Reducing
Delays and Congestion. GAO-01-725T. Washington, D.C.: May 10, 2001.

Aviation Safety: Safer Skies Initiative Has Taken Initial Steps to Reduce
Accident Rates by 2007. GAO/RCED-00-111. Washington, D.C.: June 30,
2000.

National Airspace System: Problems Plaguing the Wide Area
Augmentation System and FAA’s Actions to Address Them. GAO/T-
RCED-00-229. Washington, D.C.: June 29, 2000.

National Airspace System: Persistent Problems in FAA’s New
Navigation System Highlight Need for Periodic Reevaluation.
GAO/RCED/AIMD-00-130. Washington, D.C.: June 12, 2000.

Federal Aviation Administration: Challenges in Modernizing the
Agency. GAO/T-RCED/AIMD-00-87. Washington, D.C.: February 3, 2000.

Air Traffic Control: Status of FAA’s Implementation of the Display
System Replacement Project. GAO/T-RCED-00-19. Washington, D.C.:
October 11, 1999.




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           Aviation Safety: FAA’s New Inspection System Offers Promise, but
           Problems Need to Be Addressed. GAO/RCED-99-183. Washington, D.C.:
           June 28, 1999.

           General Aviation Airports: Oversight and Funding. GAO/T-RCED-99-214.
           Washington, D.C.: June 9, 1999.

           Passenger Facility Charges: Program Implementation and the Potential
           Effects of Proposed Changes. GAO/RCED-99-138. Washington, D.C.: May
           19, 1999.

           Airport Improvement Program: Analysis of Discretionary Spending for
           Fiscal Years 1996-98. GAO/RCED-99-160R. Washington, D.C.: May 18,
           1999.

           Air Traffic Control: FAA’s Modernization Investment Management
           Approach Could Be Strengthened. GAO/RCED/AIMD-99-88. Washington,
           D.C.: April 30, 1999.

           Air Traffic Control: Observations on FAA’s Air Traffic Control
           Modernization Program. GAO/T-RCED/AIMD-99-137. Washington, D.C.:
           March 25, 1999.

           Federal Aviation Administration: Financial Management Issues.
           GAO/T-AIMD-99-122. Washington, D.C.: March 18, 1999.

           Airport Financing: Smaller Airports Face Future Funding Shortfalls.
           GAO/T-RCED-99-96. Washington, D.C.: February 22, 1999.

           Airport Financing: Annual Funding As Much As $3 Billion Less Than
           Planned Development. GAO/T-RCED-99-84. Washington, D.C.: February
           10, 1999.




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