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Testimony of Edward M. Bolen
President
General Aviation Manufacturers Association
before the
National Civil Aviation Review Commission
May 28, 1997
INTRODUCTION
Mr. Chairman and members of the Commission, thank you for the opportunity to testify today. My name is Edward M. Bolen, and I am President of the General Aviation Manufacturers Association (GAMA).
GENERAL AVIATION
As everyone on this Commission well knows, general aviation is defined as all aviation other than commercial and military aviation. It is the backbone of our air transportation system and is the primary training ground for the commercial airline industry. It is also an industry that contributes positively to our nation’s balance of trade.
General aviation aircraft range from small, single-engine planes to mid-size turboprops to the larger turbofans capable of seating as many as 19 passengers. These planes are used for everything from emergency medical evacuations to border patrols to fire fighting. They are also used by individuals, companies, state governments, universities and other interests to quickly and efficiently reach the more than 5000 small and rural communities in the United States that are not served by commercial airlines.
STATE OF THE INDUSTRY
Given the importance of general aviation to our nation and its economy, it is a pleasure for me to be able to report that the industry is healthier today than it has been in well over a decade. The action taken by Congress to revitalize the industry by limiting the product liability exposure of manufacturers is working. Employment and production are up at virtually all of GAMA’s member companies. More new models of general aviation aircraft will be introduced to the market between now and the year 2000 than were introduced in the past ten years. Our companies are investing in plants and equipment and new research and development projects. Several are working with NASA to develop a new generation of aircraft engines. In addition, the industry has just begun the largest program in aviation history designed to generate new student pilots--GA TEAM 2000.
GENERAL AVIATION AND FAA FUNDING
The general aviation industry strongly supports the premise that it should pay to use the national air transportation system. That is why general aviation was instrumental in the creation of the Airport/Airways Trust Fund, and has worked with Congress on every increase in the fuel tax except one. (The industry opposed the 1993 increase in the fuel tax only because the revenues it generated were not dedicated to the Airport/Airways Trust Fund).
Today, general aviation pays a 21.9 cents per gallon federal tax on jet fuel and a 19.4 cents per gallon federal tax on aviation gasoline. These taxes are universally supported by industry. In fact, the entire general aviation community believes that the general aviation fuel taxes are the BEST, and should be the ONLY mechanism through which the users of general aviation fund the Federal Aviation Administration.
The general aviation community is also united in its support for a continuation of the General Fund contribution to help fund the FAA’s safety and regulatory functions. For decades, Congress has recognized that a strong and safe air transportation system benefits all members of the general public regardless of whether or not they ever set foot on an airplane. That "public benefit" has been consistently reflected in the contribution of General Fund revenues toward FAA operations.
The strength of general aviation’s support for fuel taxes and a continued General Fund contribution is matched only by the strength of its opposition to user fees. This opposition is not based merely on philosophy but real world experiences that have clearly demonstrated the negative impact fees have on general aviation.
Attached to my testimony is a copy of a letter that was recently faxed to me by a general aviation pilot in France. It is an extraordinary letter that I hope every Commissioner will take time to read. It talks about the fees he is confronted with in France including noise fees, lighting fees, ramp fees, en route fees, approach fees, etc.
The pilot says that the ever growing list of fees are "an unbearable obstacle to development of general aviation and air commerce in France and in Europe." He goes on to say "The aviation businesses are heavily depressed and a number of pilots, flight schools, aircraft sales and air carriers are disappearing at a dangerous rate. Aviation is more and more reserved to the wealthiest people."
The letter concludes with the pilot saying "I hope that Americans involved in aviation understand how important it is to fight hard against these proposed user fees. If implemented, these charges may ground them sooner than the expectation."
WHY GENERAL AVIATION FUEL TAXES ARE BETTER THAN USER FEES
At GAMA, we agree with the French pilot that the general aviation fuel taxes are better than user fees.
From a Safety Perspective:
Fuel Taxes Do Not Adversely Impact Safety. According to the FAA, user fees can discourage the safe practices of pilots (see Federal Register, March 20, 1997). For example, if user fees are charged for weather updates, talking to control towers or filing flight plans, some pilots will seek to avoid the fees by refusing these services. The general aviation fuel taxes do not discourage safe practices.
Last year, at GAMA’s Industry Outlook Press Conference, the President of Jeppesen, Horst Bergmann related one of his experiences with user fees in Germany. Mr. Bergmann was flying with a young general aviation pilot who announced that she wanted to practice her takeoffs and landings. Mr. Bergmann said the airplane descended to just a couple of feet above the runway and then began to ascend. Miffed, Mr. Bergmann asked the pilot why she did not touch down. She responded, "In Germany, there is a 12-mark charge if your wheels hit the ground, so people here don’t really touch down when practicing takeoffs and landings." From a safety standpoint, we want people to put their wheels on the ground when practices takeoffs and landings. "Virtual landings" are not in the best interest of safety.
From the Government’s Perspective:
Fuel Taxes Are Inexpensive For The Government To Administer. The government collects the fuel taxes from a handful of fuel companies rather than 600,000 pilots and 180,000 aircraft owners. This allows the taxes to be collected without a large and expensive bureaucracy of collectors, administrators, auditors and accountants.
Just last year, the country of Mexico announced that it found the administration and collection of user fees to be so complex and expensive that it was replacing its system of user fees with a fuel tax. The U.S. should not experiment with the current system of financing the FAA through the general aviation fuel tax.
Fuel Taxes Are Difficult for Taxpayers to Avoid. Because the fuel taxes are included in the amount charged for fuel, compliance with the tax is extremely high. This is not the case with user fees.
Earlier I referenced Mr. Bergmann, the President of Jeppesen, regarding safety. It is also worth noting when discussing user fees that Mr. Bergmann also mentioned a service his company provides which shows companies the routes they can take when flying in Europe to minimize user charges. In other words, his company has found a market niche helping people avoid user fees.
Fuel Taxes Approximate Use. There is no more simple and accurate way to distinguish between heavy and light users of the system than to measure the amount of fuel burned.
From the Taxpayer’s Perspective:
Fuel Taxes Are Easy to Pay. Unlike fees, paying the fuel taxes is not an administrative hassle or paperwork nightmare. The taxes are simply included in the price of the fuel and paid at the time of purchase.
Fuel Taxes Are Well Established. The general aviation fuel taxes have been in existence since 1970 and they have proven to be reliable revenue generators. Today, the entire general aviation community believes the fuel taxes are the best way for our industry to contribute to the funding of the Federal Aviation Administration.
Fuel Taxes Are NOT Subject to Government Manipulation. In some foreign countries, the civil aviation authorities charge for their services with a per person and/or a per hour fee. When this happens, it is not unusual for government to use more people than necessary and take longer than necessary to complete the task. Governments which charge a flat fee for a service tend to raise their fee faster than the rate of inflation.
CERTIFICATION IN A USER FEE ENVIRONMENT
One particular type of user fee that GAMA member companies have had to deal with repeatedly is the certification fee. As a result, I would like to focus some of my comments today on that important regulatory process.
Since 1926, the Federal Aviation Administration or one of its predecessors has been charged with "certifying" the manufacture of all aviation products. FAA certification does not signify that a given product is better than the competition or even safer than the competition. Instead, its sole purpose is to ensure that aviation products do not pose an unreasonable safety risk to the public.
Although it is the public—not the manufacturer—who benefits from the certification process, those of us in aviation are very interested in working with the FAA to constantly improve safety. Consequently, we devote a great deal of time and resources to the certification process.
It is estimated that approximately 90 percent of all costs associated with the certification process are borne by the manufacturer. According to the Challenge 2000 report by Booz, Allen & Hamilton commissioned by the FAA, the agency’s Office of Regulation and Certification could actually improve safety under a flat or declining budget by placing more administrative responsibility for regulatory compliance in the hands of those manufacturers with a proven culture of safety while maintaining a high level of involvement and oversight in key phases of development programs.
From a practical standpoint, allowing manufacturers to absorb even more of the costs of the certification process is preferable to forcing them to make cash payments to regulators through user fees. For one thing, costs absorbed by manufacturers through delegation cannot be manipulated by bureaucrats looking to generate fee revenue. For another, it does not put a toll booth between manufacturers and regulators when important matters of safety are at stake. Economists know that if you place a tax on an activity, an incentive is created for less of that activity to occur. Placing a tax on manufacturers for sharing information with the FAA will discourage the free flow of safety information.
From a philosophical standpoint, certification is a government function that benefits the general public. As such, this function should be paid for with general taxpayer revenues. To ask a manufacturer that is operating in accordance with all regulations to pay for what is, in essence a safety audit, would be similar to asking a taxpayer who has prepared his or her returns in a legal manner to pay for the cost of an IRS audit.
A final point on certification fees is that, because manufacturers must cover all of their costs of production or go out of business, it is the owner/operator that ultimately is forced to pay for all of the costs associated with certification. In this respect, certification fees would function as a type of Valued-Added Tax (VAT). The owners and operators of general aviation aircraft understand this reality and that is why they have joined with manufacturers in opposing certification fees.
CONCLUSION
General aviation is a vital link in our air transportation system and an important engine for our economy. Today, after years of decline, the industry is finally on its way to recovery.
The entire general aviation community believes that the general aviation fuel taxes are the BEST, and should be the ONLY mechanism through which the users of general aviation fund the Federal Aviation Administration. After all, the fuel taxes are well established, they closely approximate how much one uses the system, they are easy to pay yet difficult to avoid, and they are inexpensive for the government to administer.
Supplementing or replacing the general aviation fuel taxes with a new system of "fees" could, even according to the FAA, discourage the safe practices of pilots. Fees could also restrict the growth of the industry in the same manner they have restricted general aviation in Europe and the other parts of the world where they have been tried.
If the Commission and Congress determine that general aviation needs to pay a larger portion of the FAA’s costs than it is currently paying, these groups should work with industry to determine what can be done without reversing the gains that have been made since passage of the General Aviation Revitalization Act. They should not, however, give up on a system that works and turn to a system that could be anti-growth and anti-safety.