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Federal Document Clearing House Congressional Testimony
October 11, 2001, Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 2445 words

COMMITTEE: HOUSE SMALL BUSINESS

HEADLINE: IMPACT OF TERRORIST ATTACKS ON AVIATION RELATED BUSINESS

BILL-NO:

 
H.R. 3007             Retrieve Bill Tracking Report
                      Retrieve Full Text of Bill

TESTIMONY-BY: QUINTIN DEGROOT,, PRESIDENT AND OWNER,

AFFILIATION: SPENCER AVIONICS, SPENCER IOWA FOR THE AIRCRAFT ELECTRONICS ASSOCIATION

BODY:
House Committee on Small Business

"September 11, 2001 Plus 30: Are America's Small Businesses Still Grounded?"

October 11, 2001

Prepared Remarks of Quintin DeGroot, President and Owner,

Spencer Avionics, Spencer Iowa for the Aircraft Electronics Association

INTRODUCTION

Chairman Pence, Ranking Minority Member Mr. Brady, members of the Subcommittee on Regulatory Reform and Oversight, I would like to thank you for this opportunity to testify before this subcommittee on behalf of Spencer Avionics and the Aircraft Electronics Association.

As New York and Washington continue to recover from the events of September 11th I find it difficult to address this issue without considering the great loss the entire nation has felt. I have the deepest sympathy for the families and friends that have lost loved ones in these tragic events. I would also like to express my appreciation of the work that has been accomplished by the Secretary of Transportation, Mr. Mineta and of Administrator Garvey of the FAA. Their staffs have worked tirelessly to get the nation's aviation system back up and operating.

However, at the same time I believe that many of the new security measures that have been put in place, especially those that are regulating general aviation, are reactionary and are perpetuating the economic decline of aviation small businesses.

As a result of the terrorists' attacks on September 11th many of the aviation businesses that play an integral part in our national air transportation system have suffered unprecedented financial hardship. Hardships that are a direct result of the security measures put in place by the Federal Government.

The Aircraft Electronics Association (AEA) represents over 1,100 aviation businesses, like mine, that specialize in the maintenance, repair and installation of avionics and electronic systems in general aviation aircraft. General aviation aircraft range in size from light, single engine trainers to large commercial business jets. AEA members are engaged in every level of general aviation although nearly 75 percent of our membership are small businesses having fewer than 10 employees.

Spencer Avionics is one of those businesses that the AEA represents. And while general aviation includes many large turbine-powered aircraft, we tend to specialize in smaller, light single and twin engined aircraft often flown under the FAA's Visual Flight Rules.

I am Veteran and the father of 4 children. Until 3 years ago I worked for someone else; now I own a small 4-man shop that my wife and I operate.

As a direct result of the grounding of all general aviation aircraft, my shop suffered an immediate 9-day loss exceeding $15,000, and the losses continue. Many of my customers do not have access to my shop because of the temporary restrictions regarding flight within Class B airspace. As a small shop owner I have had to cut my own personal pay by 33% to keep my technicians working and cash flow flowing.

We are far from New York City but the Government's security measures put in place following the terrorist attacks have had a direct negative effect on mine and other avionics shop businesses. Like many AEA member shops, my shop draws customers from a relatively small radius of 250 miles. In my case, this radius includes the Minneapolis Class B Airspace.

AN OVERVIEW OF SECURITY MEASURES AFFECTING GENERAL AVIATION

September 11th All flight operations were suspended.

September 13th Part 135, on-demand charter flights could resume.

September 18th Part 91 IFR (instrument flight rules) flights could resume.

September 20th Part 91 VFR (visual flight rules) flights could resume w/ restrictions.

No flight instruction.

No flights in Class B airspace.

September 22nd VFR Flight Instruction resumes.

While the federal government made significant progress in the first two weeks in returning the national air transportation system to normal operations, there has been little or no progress in the past two weeks in getting general aviation and the small businesses that support it back to normal operations. Current flight limitations exclude VFR flight into 28 major metropolitan areas, foreign travel of U. S. registered aircraft and U. S. travel for foreign registered aircraft.

CLASS B AIRSPACE

Airspace within the United States is divided into six separate categories ranging from Class A, (all airspace above 18,000 feet) to Class G airspace (airspace below 1200 feet that is away from metropolitan areas), there is no Class F airspace.

Class B is the highest classification of airspace below 18,000 feet with the highest degree of positive control of all airborne traffic. There are 28 to 30 designated Class B airspaces, typically around the major airports in large cities.

The permanent regulations that apply to aircraft flying in Class B airspace requires that the aircraft must be in positive communication with the FAA Air Traffic Control (ATC) and have the equipment operating that allows the ATC to track the flight. In addition, entrance into Class B airspace requires explicit permission of ATC.

ECONOMIC IMPACT AS A RESULT OF THE SECURITY MEASURES IMPLEMENTED SUBSEQUENT TO SEPTEMBER 11TH

AEA members rely on both domestic and international aviation customers. The severe restriction on domestic general aviation operations, the VFR prohibition in metropolitan areas, and the inability for foreign customers to deliver their aircraft to U. S. repair stations has had a significant negative effect on the economies of these small businesses.

Domestically, the inability to receive aircraft from the customer and the inability to return the completed aircraft to the customer has severely crippled the ability of these small businesses to meet the demands of the customers. In addition, the decline in flight school attendance and subsequent downturn in flight instruction has led to cancellation of numerous contracts. All of this compounds a general decline in the aviation economy since the events of September 11th.

The ban on foreign aircraft travel within U. S. airspace has severely restricted maintenance, repair and alteration of foreign registered aircraft. Our maintenance facilities are recognized worldwide for the quality of the work they perform, and for many international operators, these are the maintenance facilities of choice. The current ban prohibits these aircraft from being delivered to U. S. maintenance facilities for their scheduled and unscheduled maintenance.

FUTURE INSURANCE PREMIUM INCREASES

Although it was reported that the events of September 11th will cost the insurance companies less than 10 percent of their cash reserves, increases in aviation company's insurance premiums have been reported throughout the industry. Like many AEA members, my insurance provider has also notified me that my aviation insurance will increase dramatically as a direct result of the Terrorist Attack. My options are very limited in the aviation insurance market. There are only 3 companies that provide insurance for my shop. In the past 2 years my insurance has already increased by 56% even though I have not had a claim against my policy.

AEA MEMBER LOSSES

Since the events of September 11th, AEA members have seen, on average, a 45 percent decrease in business with specific members suffering much more.

I have described the losses that I have experienced in Iowa; other AEA members have had similar losses. As an example:

- One small business in Florida reports a 75 percent decrease in business and has begun laying off employees. The business had a major contract with a flight school canceled resulting from the slowdown in flight instruction. This facility has also reported cancellation of their War Risk insurance and an increase in their hangar insurance of over 50 percent.

- Another small business in Washington State reports a 75 percent decrease in business with monetary losses exceeding $20,000.00. Since this facility in under the Seattle-Tacoma enhanced Class B airspace their customers cannot deliver the aircraft for maintenance, repair or installations.

- An instrument repair station in Kansas has been informed of a 40 to 50 percent increase in their insurance premiums although they do not supply commercial aircraft components.

- A member in Idaho has lost over $100,000.00 and has had to reduce their staff by 10 percent. While this facility has had a reduction in avionics sales and installations, the majority of their loss has come from lost fuel sales to the airlines.

- A major general aviation repair station has seen their international business decline costing them over $600,000.00.

SECURITY IN THE NATIONAL AIR TRANSPORTATION SYSTEM

While the events of September 11th are tragic, they provide an opportunity to make a paradigm shift in our view of and management of the national air transportation system. This perspective is not a "them against us" perspective. For decades, government and industry have viewed the individual segments of aviation as a transportation mode within themselves. Compartmentalizing commercial aviation separate from business aviation, separate from charter and all distancing themselves from the more traditional general aviation. Clearly based on the events of the past two weeks, this is incorrect. There is one and only one national air transportation system.

The national air transportation system must be addressed as an entire system. The NAS is a national transportation resource not unlike the marine highway system, the railway system or the Interstate highway system. Many of the challenges facing the aviation industry today could be resolved if the entire aviation system were managed as an entire national transportation resource. The proposed security measures would be based on its effectiveness for the entire system, not just one segment: leading to performance based security measures appropriate for each supporting industry. In addition to the current security measures, many of the historical arguments for closing of an integral part of a national interstate air transportation system, such as a local airport, would take on a new perspective.

Because aviation has been considered unique, many proposals have surfaced that other modes of transportation are not asked to support.

- The marine industry is not responsible for performing background checks on Coast Guard certified seaman. The Coast Guard performs the checks.

- The trucking industry is not responsible for performing background checks on perspective students. The licensing agency performs the checks before the license is issued.

- The car rental industry is not responsible for screening its customers prior to the rental of the vehicle. If the customer presents the appropriate credentials, it is assumed that they are valid and the rental contract is initiated.

- The FAA, not my business, should be responsible for the background check of any certificated individual that they have a security concern for.

If the FAA is going to issue the certificate, they should assume the responsibility of assuring the individual is qualified to receive the certificate.

In other transportation modes small businesses are not burdened with providing unique security screening. The agency overseeing the transportation mode provides the screening and management of the public with individual licenses and certificates. The FAA issues student pilot licenses, mechanic licenses, and certificated pilot licenses, why then doesn't the FAA perform background checks before they issue a certificate? Why is the burden shifted to the aviation small business?

The national air transportation system is a national resource that must be managed as a complete system with many supporting industries. The level of security measures put in place must be balanced between the overall national threat and the loss of this national resource.

CONCLUSION

We as small business owners are not looking for some kind of a Government subsidy to get us out of trouble. My dad always said if you're not part of the solution, you're part of the problem. It is not the Government's job to run any business or bail it out of its own mis-management. However, the government can help us survive the disaster of September 11th and the Federal Government security measures implemented as result of the disaster by providing tax relief and by making low interest loans available.

To help general aviation businesses weather the storms of the terrorist acts of September 11th and the resultant Federal action, the Association supports the General Aviation Small Business Relief Act of 2001 (H.R. 3007), introduced by Congressman Bill Shuster (R-PA) and would ask the members of this committee to also support it.

In addition, to help our aviation small businesses to return to work the Association would request from this committee:

1. Encourage the FAA to develop a plan that would allow for the delivery of U.S. registered aircraft to repair stations located in the 28 major metropolitan areas within enhanced Class B airspace.

2. Encourage the FAA to develop a plan that would allow for the delivery of foreign registered aircraft to U.S. repair stations for maintenance, repair and alteration. Many of these repair stations have spent decades establishing themselves as an international aviation resource. Now their loyal customers cannot get access to their facility. 3. Expand the boundaries of the disaster area to include the aviation businesses that have endured financial hardship as a direct result of the federal security measures put in place following the terrorist attacks in New York and Washington so that these businesses will have access to the disaster relief resources of the Small Business Administration. (Because the majority of general aviation facilities are outside of the immediate disaster zones of New York and Washington, they are not eligible for disaster relief support from the SBA. Even though their losses are directly related to the security measures taken following the terrorist attacks.) 4. Investigate and, if possible, stabilize the insurance premiums charged general aviation companies by the insurance industry. It is hard to understand why a terrorist act in New York should cause the insurance premium for a general aviation repair station in Florida to increase.

I appreciate the opportunity to testify before this Subcommittee on behalf of Spencer Avionics, my employees and the members of the Aircraft Electronics Association. I would be pleased to address any questions.



LOAD-DATE: October 11, 2001