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Finance Subcommittee

Members:

  • Jack Pelton (Subcommittee Chair)
  • Severin Borenstein
  • Daniel McKenzie
  • Raul Regalado
  • Glenn Tilton
  • Christopher Williams
  • Thella Bowens

Background

The overall issue of airline stability and funding future investment is critical.

Airlines have reported net losses in seven of the past ten years, due in part to external shocks and the global recession. Even as the economy shows signs of recovery and passenger traffic begins to grow again, profitability remains elusive. Aviation disruptions and uncertainty weaken the country’s role in the global economy, and jeopardize billions in capital funding needed over the next decade to fund the Next Generation Transportation System (NextGen).  This puts financial strain on the Airport and Airway Trust Fund, which is dependent on air travel fees and provides the bulk of resources for FAA.

As NextGen continues to be implemented, aircraft operators will need to acquire additional equipment to take full advantage of the benefits.  In addition, airports will need to make infrastructure improvements to accommodate efficiencies that can be achieved through modernization of the air traffic control system. 

Even if there is sufficient funding to support FAA NextGen and legacy programs, we will not realize many of the benefits NextGen can provide without infrastructure investments by aircraft owners and operators.  The projected cost of equipping the commercial aircraft fleet with NextGen capable equipment is in the billions.  Airlines have raised concerns equipping their fleets given the current financial condition of the industry.  Moreover, the short-term outlook for the industry remains uncertain. Raising capital in the near future, if necessary, will be a daunting task for airlines. In order to encourage efficient adoption of NextGen equipment and technology, the aviation industry has suggested it may be important for the Federal Government to incentivize equipment upgrades.

Initial Questions

  • Are incentives necessary to spur equipage by both operators and suppliers?
  • What sort of incentives can be provided?

Delays in the terminal environment threaten the benefits NextGen. As a result, airport congestion should be addressed and reduced. Airports will have to make substantial investments in infrastructure to meet the air travel demand of the future and utilize the full potential of NextGen.

Airports vary considerably in their ability to obtain funding for capital improvement projects. Smaller airports typically do not enjoy the same level of AIP entitlement and PFC funding as larger airports, nor do they enjoy the same level of access to the bond markets as larger airports. While capital improvement projects remain a top priority for airports, some projects cannot be completed simply because of a lack of available funding.

Initial Questions

  • What innovative financing mechanisms can help provide capital improvement or operational financing for airports?
  • Is there an appropriate balance between Federal and local airport spending?

Record of Meeting

Updated: Monday, May 20, 2013