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The Senate Commerce Committee is holding a hearing today to review several nominations in its purview, including FAA administrator-designate J. Randolph Babbitt and DOT deputy secretary-designate John Porcari. Opening statements are going on now. Babbitt is, as you know, the former president of the Air Line Pilots Association and a pilot at Eastern. According to Mark Warner (D-Va.), who is chairing the hearing at the moment, Babbitt is “the right person to lead the FAA at the moment.” (Wow, tough crowd.) Porcari is Maryland’s secretary of transportation.

Opening statements by Babbitt and Porcari have been posted on the committee’s website.

I’m not on the Hill today, but I am watching the hearing’s live webcast. I’ll bring you aviation-related highlights of the hearing throughout the day, so refresh this post for the latest updates. Stay tuned!

Babbitt

Babbitt

11:43. Interesting item from Babbitt’s testimony: “I have worked with members of Congress on major aviation safety issues, including one of which I am most proud, ‘One Level of Safety.’ I led this project in 1993 while I was president of ALPA. This program resulted in required regional carriers to operate under the same rules and at the same level of safety as their major carrier counterparts.” Of significant relevance given the attention paid to small-lift provider safety standards in the wake of the NTSB’s Colgan Air crash hearings.

11:48. Frank Lautenberg (D-N.J.) was principally responsible for torpedoing the confirmation of Robert Sturgell, former president Bush’s FAA nominee. He’s much happier with Babbitt today, about whom, when he slips up and says “if you are confirmed, he adds “if you’re not it will be a miracle.” Lautenberg asks about the New York / New Jersey / Philadelphia airspace redesign. Would Babbitt put a hold on the redesign until frontline air traffic controllers ha had a chance to weigh in? “I’m not exactly certain where that process stands at this time,” Babbitt replies. “On a personal basis, I would really like to solicit input from all the stakeholders in that area. . . . I think it’s very important that [controllers] have input in this process.”

Lautenberg then raises a parochial concern that is more than parochial, given the airport’s role in the system: reported controller shortages at Newark Liberty International Airport. “Can you assure us that the Newark tower will be staffed to the volume of performance we require there?” Babbitt: “It’s my hope that every tower in this country will be staffed and manned to the highest degree.” He refers to the “bubble of controllers being in a similar age, a band of age” who are going to retire soon. (And already are.–ed.)

(more…)

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TEMPE — Echoing Doug Parker’s plea for the government to “do no harm” to the airline industry, C. A. Howlett, US Airways’ top government affairs officer, outlined the challenges the industry — and US Airways in particular — face in the policy environment. His primary focus was the pending FAA reauthorization bill. Put off since 2007, the bill has been passed by the House but no action has been taken in the Senate. “We will maybe get this in calendar year 2009 but no one is betting anything heavy on that particular forecast,” he quipped.

Howlett is in no rush to get the House bill passed, because it has several provisions that give US Airways and other airlines pause. The bill increases the Passenger Facility Charge (PFC) from $4.50 to $7.00. PFCs are used to fund airport improvements but are levied by airlines when passengers buy tickets. This, Howlett said, would add $2 billion to the airline industry’s costs. “Airports have the ability to raise revenues by raising our landing fees and charges,” he added. “Not all airports are the same. . . . [Raising landing fees is]a better way to finance projects.” Besides, he said, airports got $1.1 billion in the stimulus bill, plus $1 billion for security improvements.

Also of concern in the House’s FAA bill are labor issues regarding collective bargaining procedures, the passenger’s bill of rights provisions, and limitations on foreign repair stations. Howlett said that there is a provision inserted at the behest of the firefighters’ union that would cost US Airways alone $15 million per year at their hubs. (more…)

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TEMPE — US Airways chairman and CEO Doug Parker opened the airline’s annual media day with remarks on the state of the airline industry, pointing out financial, political, and labor-related challenges in the year ahead and calling on airline managers to change the way they think about industry competition.

Parker has long been an apostle of consolidation in the industry, leading America West to take over US Airways in 2005 and attempting to take over Delta in 2006-07. He pointed out today that no single airline has more than a 25 percent share of the U.S. airline market. “In a network business, that’s a lot of fragmentation. It’s a fragmentation that makes it hard to produce returns for shareholders,” he continued. “More [integration] will produce even more value.” He said that US’s hostile takeover of Delta attempt spurred the Delta-Northwest merger, and he added that whether US Airways is in mergers or not,  the airline will benefit: “Where the real value occurs is the reduction of fragmentation.”

As for government affairs, Parker said that “this is a business that is overtaxed, that is in many ways overregulated.” In what I interpreted as a veiled reference to House transportation chairman Jim Oberstar (D-Minn.), who has declared war on airline consolidation and networking, he said: “We have many in congress who view aviation as a public good.” Airlines have to focus on little issues like service to individual congressional districts. Congress, he said, wants to harness the industry to serve its own interests. [Not unlike most other industries, these days --ed.]  The regulatory picture looks bleak, he said. “This one is probably not going to get better. . . . The best we can do on this one is hold the line. . . . Our message through 2009 is ‘do no harm.’ Let us compete, leave us alone.” (more…)

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U.S. then, Dubai now

The Wall Street Journal has a striking item today on the life of flight attendants on Dubai’s state-owned Emirates Airline.* With its descriptions of high-rise Dubai living and poolside relaxation, it doesn’t sound so bad. But what’s striking is how similar the Emirates standards for flight attendants today are to U.S. standards of yesteryear. Consider:

  • “Tough rules are enforced, including some that would be deemed discriminatory in the West, such as weight requirements and a no-pregnancy policy for unwed women.”
  • The carrier meticulously recruits attractive young men and women from around the world. . . . As part of the airline’s standard training, Ms. Rodriguez attended beauty and etiquette training. She’s required to keep her makeup fresh, even on long flights. High-heels are a must when she’s in uniform, even on the ground. Both men and women are expected to get manicures and facials.”
  • “Innocuous onboard flirting is condoned: Emirates’ rules require attendants to politely accept a business card or phone number if it’s proffered by a passenger.”
  • “If a single female attendant shows up pregnant, she’s fired. Openly gay male attendants need not apply. Premarital sex and homosexuality are both illegal in Dubai.”
  • “Crew members aren’t allowed to drink in the 12 hours before a flight. Smoking and eating in uniform are prohibited. If an attendant gains too much weight, he or she is put on a diet by the airline’s resident nutritionists.”
  • “Seventy-five percent of total flight crew must be female.”

U.S. airlines used to enforce similar standards on those who were then, rather quaintly to my generation’s ears, called stewardesses. They were forced to retire in their thirties, faced weight and height limitations and gender boundaries, and fired if they married or got pregnant. Between 1964, when the Civil Rights Act was enacted, and 1991, when weight standards were loosened and revised upward by age, cabin crew members gained full protection of the law, although a few restrictions related to performing safety functions remain. (More information is available on their union’s website.)

For now, Dubai bans transportation unions, but that hasn’t stopped people, including (or especially) U.S. nationals, from wanting to fly for Emirates, as you can see in pilot and cabin crew discussion forums. So, the question remains: will Dubai remain a sort of bizarre Randian paradise of labor discrimination, or will it eventually go the way of major industrialized economies and offer crucial protections to workers? International pressure is moving in the latter direction.

Rich Dubai Flirts With Hard Times, But Its Airline Is Still Flying High [WSJ]

*No, that’s not a typo.

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Duane Woerth

Duane Woerth

There’s a lot of virtual ink being spilled in the blogosphere about Obama’s shortlist for FAA administrator. Some of those rumored to be under consideration include Representative Jerry Costello (D-Ill.), the chairman of the House Aviation Subcommittee; Representative Peter DeFazio (D-Ore.); Clinton-era FAA chief Jane Garvey;  Robert Herbert, an aide to Senator Harry Reid (D-Nev.); Boeing executive Neil Planzer, and former Air Line Pilots Association president Duane Woerth. Regarding the latter, the Wall Street Journal‘s Middle Seat Terminal blog has this to say:

Woerth . . . has met with House Transportation and Infrastructure Committee Chairman James Oberstar and has his tentative support, according to people familiar with their discussions. Sen. Jay Rockefeller, who heads an aviation subcommittee, is slated to meet with Woerth in the next few days. . . .

Still, the Journal reports that Woerth has the strong backing of various unions seeking to cash in political capital for their aggressive support of Obama’s candidacy. But Woerth, who frequently prodded the agency to step up air-safety efforts, also has garnered bipartisan endorsements on Capitol Hill and enjoys the backing of some aircraft makers and airline-industry officials.

I called a airline pilot friend and ALPA member at one of the nation’s largest airlines to get his impressions. This pilot  thought Woerth did an “OK” job as head of ALPA. My source especially praised Woerth’s handling of the critical time surrounding the September 11 attacks: “He was head of ALPA during 9/11. He had a huge amount dumped on his plate with the tremendous challenges to the industry” — including persuading pilot groups to make wage and benefit concessions in attempts to save their airlines. (more…)

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I bet you’re thinking, how would a bailout of the “big three” U.S.-based automakers — General Motors, Ford, and Chrysler — affect a bailout of the airline industry? Tellingly, a few observers have compared the situation with the car-makers (Scene: Washington. Detroit: Give us big money money; our bankruptcy is your DOOM. Congress: Sure, always happy to help the UAW, but let’s install a car czar to apply industrial policy and oversee green car production.) with the airline bailout in 2001. A while back, I warned that as troubles persist in the airline industry, we should look out for a revival of the Air Transportation Stabilization Board. A recent Wall Street Journal article by Paul Ingrassia holds up the ATSB as a model for Detroit:

If public dollars are the only way to keep General Motors afloat, as the company contends, a complete restructuring under a government overseer or oversight board has to be the price.

That is essentially the role played by the federal Air Transportation Stabilization Board in doling out taxpayer dollars to the airlines in the wake of 9/11. The board consisted of senior government officials with a staff recruited largely from the private sector. It was no figurehead. When one airline brought in a lengthy, convoluted restructuring plan, a board official ordered it to come back with something simpler and sustainable. uniThe Stabilization Board did its job — selling government-guaranteed airline loans and warrants to private investors, monitoring airline bankruptcies to protect the interests of taxpayers — and even returned money to the government.

William Swelbar provides a little more background:

On multiple occasions, United applied for an ATSB-backed loan prior to its decision to file for bankruptcy protection in late 2002. The ATSB continually found that United had failed to file a business plan that was sustainable. Ultimately United filed for bankruptcy protection and continues its restructuring today. The ATSB simply was not prepared to provide United a bridge loan to nowhere. Today, United is in a much better place as a result. Not out of the woods completely, but the prospects for tomorrow are much brighter.

The travel industry disintegration after 9/11 was an unexpected external shock, but for airlines like United, it unmasked the unsustainable labor obligations and management decisions that were obscured in the heady boom time of 1999-2001. Some airlines, the ATSB determined, could do with a small loan guarantee in order to get through a rough time not of the airlines’ making. But for legacy carriers with legacy cost structures, a bailout would only postpone the reckoning to come, possibly making the pain worse later. United, Delta, and Northwest all needed a run through bankruptcy court. (I’ll say that United did not do enough to help itself in bankruptcy court. For example, management threw out silly ideas like Ted and didn’t simplify its fleet sufficiently.)

What does this have to do with Detroit? As I said back in June, the times today do not call for an airline bailout. Nor do they call for a bailout for Detroit. The big three’s special pleading notwithstanding, its problems are due entirely to bad management and extraordinary concessions to labor unions. As Swelbar adds, “It is my hope that we do nothing unless a radical transformation of the legacy issues that make the auto industry non-competitive are insisted upon.”

So where does that leave the big three? Exactly where legacy airlines were left: in bankruptcy court. Michael Levine — an aviation policy expert, natch — points out in today’s Wall Street Journal, “GM as it is cannot survive without long-term government life support. If it gets that support, it can’t change enough and won’t change fast enough. Contrary to [GM CEO Rick] Wagoner’s brave declaration, bankruptcy is an option. In fact, it’s the only option that merits public support and actually has a chance at succeeding.”

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If you’re a regular reader of the Aviation Policy Blog (and I hope you are; the best way to keep up to date is to subscribe to my feed), you’re well aware of how aviation is playing out in the 2008 election (or the extent to which it isn’t). In today’s Wall Street Journal, “Middle Seat” columnist Scott McCartney takes on what the next president will need to do. I commend this read to you. First, the stakes of inaction on aviation issues:

Last year, nearly one-quarter of all U.S. airline flights were delayed, and the average delay was 55 minutes, according to the Federal Aviation Administration. Passengers lost 112 million hours of time spent waiting. . . . And that doesn’t count the delay already baked into airline schedules. On average, U.S. airline flights were scheduled 15 minutes longer in 2006 than in 1997, based on the same distances. . . . Delays cost airlines $8.1 billion in direct operating costs in 2007, mostly burning extra fuel and paying crews for the extra time. That’s more than the U.S. industry has ever earned in a year. . . . More than 1,600 flights last year sat for longer than three hours waiting to take off, according to the Bureau of Transportation Statistics. More than 4.4 million bags were mishandled. Complaints about airline service were up 65% last year.

McCartney outlines several steps that the next president can take. He also underscores the urgency of making these changes now: “The time to fix it is now, when the economic downturn has given the system some slack. This is when it’s easiest to replace, repair and expand.” We didn’t do this during our last downturn, after 9/11, and it hurt badly in 2006-2007. So, what does he recommend?

  • Air traffic control modernization. “The current time-table for modernizing air-traffic control covers 20 years, and the history of the effort is filled with delays. What’s needed is a full-court press. He then quotes Marion Blakey on how viable ATC transformation is, but her five years at the helm of the FAA and in charge of NextGen are conveniently glossed over.
  • Split the FAA into two agencies. “Many industry watchers would like to see the FAA split into two parts: a safety regulator for airlines, airports and air-traffic controllers, and a separate air-traffic-control system run in a business-like manner by a not-for-profit entity, not government.” That includes this industry-watcher. “One major reason to split the FAA is that the agency today is both the safety regulator and the operator,” McCartney continues. “In air-traffic control, the FAA regulates itself, leading to potential conflicts of interest.” He cites Dorothy Robyn’s excellent paper this summer for the Brookings Institution’s excellent Hamilton Project. He also quotes former Continental chairman Gordon Bethune, who carries the flag for ATC privatization/commercialization: “Bethune . . . hopes the new president will push for ‘a quasi-government agency to build and operate a modern air-traffic-control system.’ Bond financing could be used for new equipment instead of asking Congress to pay for it year by year.”
  • Other issues. McCartney urges measures to make TSA screening less invasive and troublesome; passenger-bill-of-rights-type measures, a “better plan” to ease congestion at New York-area airports, “a Transportation Secretary with muscle to fix the problem, not prolong it,” and incentives for greener, cleaner aerospace R&D.

To McCartney’s memo, I would add the following items:

  • A new FAA administrator, hired from outside the agency, with respect from industry and labor. Labor-management relations at the agency are beyond toxic, and promoting current management (as Bush did when he nominated Robert Sturgell) is only going to inflame the situation. To the extent that Barack Obama has engaged in aviation issues, he has been entirely aligned with the air traffic controllers; he needs to demonstrate his independence by picking someone who will command the controllers’ respect and negotiate with them while still defending the prerogatives of the FAA’s “customers”–system users–and taxpayers.
  • A commitment to an alternative funding structure for the FAA. Ticket and fuel taxes are not enough. The FAA needs a user fee system. This will align use of the system with the cost of providing ATC services. The current administration has admirably pushed for user fees; perhaps, in an environment less rabidly partisan than that existing between Congress and the White House, we can see rapprochement on this crucial priority.

Commentators rightly say that thirty years out, we’re not going backward on airline deregulation. But will the next president take crucial steps in pursuing “Deregulation 2.0,” the critical public-sector overhaul that will make our aviation system more competitive, productive, and efficient for decades into the future? If the next president takes on established interests and pursues these reforms, future generations of fliers will thank him.

A Flier’s Plea to the New President [WSJ]

See also the LA Times and FlightBlogger guides to the politics of air travel.

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