REMARKS FOR
THE HONORABLE MARY PETERS
SECRETARY OF TRANSPORTATION

ENERGY/AIR SERVICE SUMMIT
“MEETING AVIATION’S ENERGY CHALLENGE THE AMERICAN WAY”
WASHINGTON, D.C.

JULY 10, 2008
9 AM

Good morning, everyone. I want to thank Greg Principato for that kind introduction. And let me also salute our organizers – Chip Barclay and AAAE – as well as all the sponsoring groups involved for bringing us all together for this very timely and important conference.

I would also like to recognize my predecessor and mentor, Secretary Norm Mineta, who is here today, as well as former FAA Administrator Jane Garvey.

As everyone in this room is all too well aware, oil prices have soared to record levels and threaten to go higher. The impact is being felt throughout the economy, and one of the hardest hit sectors is aviation.

In the first four months of 2008 alone, total airline fuel costs jumped more than 50 percent compared to the previous year, even while consumption remained virtually flat. Those numbers do not reflect the continued sharp rise in oil prices over the past two months.

With every penny increase in jet fuel costing the airlines an additional $15.9 million a month, this rapid spike in oil prices is fundamentally changing the economics of the industry.

The impact is not limited to the airlines. Airport Directors tell me their budgets are being hit from all directions. Higher energy prices add to operating costs, while they worry about the slowing economy and cut-backs in airline flight schedules that reduce airport revenues, including Passenger Facility Charges.

American aviation is struggling with one of the greatest challenges in its history. It is important to recognize we are dealing with a supply and demand equation. There are several options we could pursue – and should have been pursuing – to lower the price of fuel by increasing domestic oil production here in the United States.

The President has called repeatedly for diversifying and expanding domestic oil supply – from the Outer Continental Shelf, from oil shale, from the Arctic National Wildlife Refuge, and by expanding and enhancing our refinery capacity. But even today, Congress will not let these ideas get off the ground.

We have got to depoliticize the issue and act now to expand energy production in this country, because world demand is only going to increase.

It just makes me furious to think of all of the good people in the aviation industry losing their jobs… of the communities losing air service… because politics has driven policy on energy issues for far too long.

Meanwhile, airline and airport executives are forced to make tough business decisions to get through the crisis.

This is an industry that has built a strong record on energy efficiency. You are moving 12 percent more people and 22 percent more freight than in the year 2000 – and using 4 percent less fuel to get them to their destinations. So often what is left are extreme measures like flying planes at reduced speeds to save fuel.

I commend you for doing what you have to do to squeeze inefficiency out of your operations, and especially for working together to come up with creative new ways to reduce energy consumption.

I have heard that airports that are able and equipped are making power available at the gate and providing pre-conditioned air. As a result, airlines are able to turn their engines off while at the gate and save valuable fuel. Airports also are working with the airlines and our Air Traffic Organization for ways to more efficiently manage the airfield to reduce airfield taxi times.

I can assure you that we are fully committed to working with the industry to help you increase efficiency and reduce fuel burn. We also understand that this is no time to pile higher insurance costs onto the airlines’ financial burden.

So today, I am directing the Federal Aviation Administration to continue to provide the airlines with War Risk Insurance under current terms through the end of the year.

Our long-term goal is to permit a gradual re-entry of commercial insurance companies into the war risk market, and that is what we have proposed in our reauthorizing legislation. Forcing airlines to find commercial insurance today, however, could more than double what they are paying – assuming a policy is even available.
We want to help the industry. Acting FAA Administrator Bobby Sturgell has meetings scheduled over the summer here in Washington and in Atlanta to sit down with key stakeholders and discuss initiatives and strategies to help reduce aviation fuel costs.

Topping the list of ways to provide immediate relief is eliminating congestion wherever and whenever we have an opportunity to do so. Planes circling airports or waiting on the tarmac waste fuel and have a negative impact on our environment.

For close to a year now, we have been working with the New York region on a series of measures to relieve the debilitating congestion that emanates from there and ripples across the entire country.

We have made arrangements with the Department of Defense to make military airspace available to commercial traffic during busy holiday travel periods, including the recent Fourth of July weekend.

Last month, the FAA opened new East Coast routes over the ocean that have the potential to save millions of dollars in fuel. And we have given general aviation business jets approaching Cincinnati area airports the flexibility to fly higher longer. In the first month we have already received reports of efficiency benefits and fuel savings.

The most dramatic improvements will be realized through the transition to a modern, satellite-based air traffic control system. There is good news here.

Acting Administrator SturgelI is leading the charge to accelerate NextGen in specific areas. We are moving away from what I call the peanut butter approach to allow the industry and the American people to begin seeing the benefits, among them environmentally friendly, energy efficient approaches that will save fuel and money for the airlines while getting travelers to their destinations more quickly.

Although it is still early, exciting things are happening already. In our initial flight demonstrations of continuous descent arrivals in Miami and Atlanta – think smooth glide path rather than the old stair-step approach – airlines saved between 10 and 60 gallons of fuel per arrival. That is about one percent of the fuel consumption for the entire flight – and with the price of jet fuel these days, the savings add up fast.

Another approach procedure we are testing – called Tailored Arrivals – takes advantage of technology to integrate available data on factors such as congestion, weather, and airport capacity, and provide the most efficient arrival flight path for each specific flight. Since December 2007, pilots have flown 251 tailored arrivals into San Francisco, saving an estimated 27,350 gallons of fuel – or 100 to 130 gallons per arrival.

And for the airport community, NextGen means better use of airport capacity, greater design flexibility, reduced physical footprint, and reduced separation between runways – and will make airports a better neighbor.

By improving operations and taking advantage of technology, we can manage our airspace and our ground-space much more efficiently than we do today, saving significant amounts of fuel.

It is imperative that airports and airlines have maximum flexibility in the face this crisis. As part of our continued efforts to give airports and carriers the tools that will allow them to manage congestion and operate at peak efficiency, today I am announcing that the Department of Transportation is issuing our final policy on Rates and Charges.

While keeping overall charges tied to costs, effective immediately airport managers will be able to take advantage of market incentives to help alleviate fuel-wasting congestion during peak hours.

With this policy, pricing options are available to help airport operators and carriers figure out how best to spread flights at busy airports throughout the day and to encourage efficient use of aircraft or direct traffic to less-congested airports in the region – and to help airports projected to face congestion in the future take action before the crunch.

All of these efforts will help the airlines operate more efficiently and decrease fuel burn. But reducing demand is not enough. Aviation cannot operate without fuel… affordable fuel.

And while government efforts to expand supply are stalled, today I am announcing a new X-PRIZE competition to stimulate private development of a jet-fuel alternative.

It is thrilling to have the prestigious X-PRIZE Foundation partner with us to take on renewable aviation fuels and technologies, and I would like to recognize Don Foley, an Executive Director at the X-PRIZE Foundation, who is with us today.

Next steps are determining the terms of the jet fuel competition and the amount of the cash prize – and the purse is expected to be substantial. Current X-PRIZE competitions range from $10 million to $30 million.

This competition will be in the best tradition of American aviation. Prizes and awards helped the young industry take off in the early 20th Century, attracting the inventors and aviators determined to set new records for altitude, speed and distance.

Lindburgh’s nonstop solo flight across the Atlantic earned him the $25,000 Orteig Prize in 1927. More recently, Burt Rutan launched America into sub-orbital space in the process of claiming the $10 million Ansari X-PRIZE in 2004.

Now, the race to refuel American aviation is on, and our hope is that the X-PRIZE will jump-start investment and spur innovation. It will be a competition that everyone wins, because a breakthrough in alternative jet fuels is a potential game-changer that could bring lower airline fuel costs, greater U.S. energy independence, and cleaner air.
For more than a century, creativity and innovation have been the hallmark of American aviation. Today, the industry is being tested as never before.

With jet fuel prices circling the $4-a-gallon mark, we must find fresh ways to make operations more fuel efficient, and relieve pressure on the supply side by developing new sources of oil here at home or changing the game with alternatives to traditional jet fuel.

Again and again, aviation has shown its resilience. I am confident that, with the right incentives, this dynamic industry can retool – and refuel – to cope with high energy costs.

Thank you.

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