Statement for the Record
of the
National Air Transportation Association
before the
Subcommittee on Aviation Operations, Safety and Security
Committee on Commerce, Science and Transportation
United States Senate
Hearing on
Improving Air Service to Small and Rural Communities
July 17, 2007
253 Russell Senate Office Building
Washington, DC
Chairman Rockefeller and Ranking Member Lott, the National Air Transportation Association (NATA) appreciates the opportunity to submit the following statement to be included in the record for the subcommittee’s July 17, 2007 hearing regarding air service to small and rural communities.
NATA, the voice of aviation business, is the public policy group representing the interests of aviation businesses before Congress, federal agencies and state governments. NATA's 2,000 member companies own, operate and service aircraft. These companies provide for the needs of the traveling public by offering services and products to aircraft operators and others such as fuel sales, aircraft maintenance, parts sales, storage, rental, airline servicing, flight training, Part 135 on-demand air taxi, fractional aircraft program management and scheduled commuter operations in smaller aircraft. NATA members are a vital link in the aviation industry providing services to the general public, airlines, general aviation, and the military.
At the request of industry members, NATA has also formed the Airline Services Council (ASC), to further the interests of companies that perform services to scheduled air carriers as their primary business. ASC-member company services include aircraft fueling, waste management services, catering, terminal services, cargo handling, aircraft handling, deicing, maintenance, security services, and aircraft grooming. These 23 domestic and international companies currently employ over 90,000 people worldwide, generate over $2.5 billion annually in sales, and service approximately 450 airports.
In recent years, NATA has heard from several ASC companies regarding a disturbing trend emerging at airports throughout the United States. Airport authorities, in an attempt to seek financial growth, are offering ground support services that would compete with, and in some cases replace, private businesses already performing such services at an airport. In the financial downturn following the 9-11 attacks, airports across the country have seen revenues from their airline customers decline, and have sought alternative methods for increasing airport revenue. While it is the airport sponsor’s right to venture into the business of providing aeronautical services, this practice can have negative effects for both the airport and its tenants. The practice of airport authorities seeking to compete with private businesses at the airport results in strained tenant/airport operator relations at the airport, is not cost effective, and usually has a negative impact on the airport’s attempts to achieve greater operating and financial targets.
Furthermore, airport authorities seeking to provide these ground support services possess an unfair financial advantage over private companies. Public entities such as an airport authority already receive funds through federal, state and local taxes, as well as from fees assessed on passengers at an airport. Airport authorities also have tremendous leverage over existing businesses at an airport, as the airport controls most of the terms of a particular company’s lease. The aviation services industry is unlike any other – any private company wishing to offer such services at an airport must do so at the discretion of the airport authority. These companies cannot simply move locations if the terms of a particular lease or operating contract are not favorable to a company.
NATA also has strong concerns about a potential trend for airports to use grants through the Small Community Air Service Development program (SCASD) to further this goal of providing aeronautical services to commercial and general aviation aircraft. While NATA remains supportive overall of the SCASD’s goal of increasing air carrier service to under-serviced communities, the association remains opposed to allowing communities to use SCASD grants for the purchase of equipment or infrastructure. It is inherently wrong for the U.S. Department of Transportation to provide federal funds to public entities that would allow them to compete with private enterprise.
The SCASD was originally created by Congress to issue grants to communities for programs including advertising, promotional activity, studies on the impacts of new service, financial incentives for air carriers, or “to ground service providers providing access to air transportation services.” These examples do not include the establishment of airport-owned revenue-generating endeavors. By receiving grants to purchase or construct ground support infrastructure, local governments are in some cases receiving a subsidy from the federal government to compete with private businesses, which do not have access to the same funding source. There is no reason, other than the desire to generate additional revenue, for a government-sponsored agency to provide these ground support services when a private sector company is willing to do so at a reasonable cost. Additionally, government competition with the private sector can also have an adverse effect on the local economy. When a public entity replaces a private company, all levels of government lose the tax revenue provided by that private company, as the government is exempt from such taxes.
The International Air Transportation Association (IATA) also believes that allowing and promoting open competition among fuel suppliers and other ground support providers is a key component to meeting shared airport and airline objectives. IATA has issued opinions stating that a lack of competition in service areas has a great negative impact on both prices and levels of service, which is the exact opposite of the goals of the SCASD. Reduced competition leads to less traffic, fewer flights, and fewer passengers at an airport. Closed markets and restrictive business practices are common elements among airports that have a history of financial difficulty.
The Office of Management and Budget has also issued an opinion on the broader issue of public/private sector competition, though Circular Number A-76, establishing federal policy regarding the performance of commercial activities by government entities. The document states, “In the process of governing, the Government should not compete with its citizens. The competitive enterprise system, characterized by individual freedom and initiative, is the primary source of national economic strength. In recognition of this principle, it has been and continues to be the general policy of the Government to rely on commercial sources to supply the products and services the Government needs.”
As part of its goals for the 2007 Federal Aviation Administration reauthorization legislation, NATA is encouraging Congress to adopt legislative language amending the SCASD to prohibit the Department of Transportation, when issuing grants under the program, from issuing grants that would allow an airport authority to purchase fueling and other ground service equipment that would allow the authority to compete with private businesses already in existence at the airport. Such language will prevent the widespread use of taxpayer funds to enable public entities to compete with private enterprise. NATA recognizes that in many cases, it is not financially feasible or there is no market for private businesses to operate at a particular airport, and NATA represents many airport authorities who currently provide these services. Our chief objection to the use of these grants is in situations where private businesses already operate at an airport, or seek to do so but have been prevented from bidding for these services.
NATA is hopeful that as the Senate continues to move forward its FAA reauthorization legislation, S. 1300, the Committee on Commerce, Science and Transportation more closely examine the SCADS program and amend the program’s grant requirements to ensure that airport authorities are not able to use taxpayer funds to install infrastructure that would financially harm existing or hopeful businesses at a particular airport. We look forward to working with the committee in providing additional information on this critical issue.