Copyright 2001 FDCHeMedia, Inc. All Rights Reserved.  
FDCH Political Transcripts
October 11, 2001, Thursday
TYPE: COMMITTEE HEARING

LENGTH: 20971 words

COMMITTEE: HOUSE SMALL BUSINESS REGULATORY REFORM AND OVERSIGHT SUBCOMMITTEE

HEADLINE: U.S. REPRESENTATIVE MIKE PENCE (R-IN) HOLDS HEARING ON THE ECONOMIC CONSEQUENCES OF THE SEPTEMBER 11 ATTACKS ON SMALL BUSINESSES

SPEAKER:
U.S. REPRESENTATIVE MIKE PENCE (R-IN), CHAIRMAN

LOCATION: WASHINGTON, D.C.

WITNESSES:

MAUREEN TARASCIO, OWNER OF AIR EAST MANAGEMENT IN FARMINGDALE, NEW, YORK
DAVID WARTHOFSKY, PARTNER FOR THE POTOMAC AIRFIELD IN FORT WASHINGTON, MARYLAND, ON BEHALF OF THE NATIONAL AIR TRANSPORTATION, ASSOCIATION
A REPRESENTATIVE OF THE AIRPORT MINORITY ADVISORY, COUNCIL
GEORGE DOUGHTY, EXECUTIVE DIRECTOR OF LEHIGH VALLEY INTERNATIONAL, AIRPORT IN ALLENTOWN, PENNSYLVANIA, FOR THE AIRPORTS, COUNCIL INTERNATIONAL OF NORTH AMERICA
HECTOR TORRES, GENERAL MANAGER OF THE ST. GREGORY HOTEL ON BEHALF OF, THE HOTEL ASSOCIATION
BONNIE ADAMS, PRESIDENT OF THE LWEISTON TRAVEL BUREAU IN LEWISTON, MAINE, ON BEHALF OF THE AMERICAN SOCIETY OF TRAVEL, AGENTS
CLINTON DEGROOT, PRESIDENT AND OWNER OF THE SPENCER AVIONICS IN, SPENCER, IOWA, FOR THE AIRCRAFT ELECTRONICS, ASSOCIATION
DAVID CHESEBORO, PRESIDENT OF DOTS MOTORCOACHES IN DAYTONA BEACH, FLORIDA, ON BEHALF OF THE AMERICAN BUSH ASSOCIATION
FORMER REPRESENTATIVE JAMES COYNE ON BEHALF OF, THE NATIONAL AIR TRANSPORTATION ASSOCIATION

BODY:

 
HOUSE SMALL BUSINESS COMMITTEE: SUBCOMMITTEE ON REGULATORY REFORM
AND OVERSIGHT HOLDS A HEARING ON THE ECONOMIC
CONSEQUENCES
OF THE SEPTEMBER 11 ATTACKS ON SMALL BUSINESSES
 
OCTOBER 11, 2001
 
SPEAKERS:
U.S. REPRESENTATIVE MIKE PENCE (R-IN)
CHAIRMAN
U.S. REPRESENTATIVE LARRY COMBEST (R-TX)
U.S. REPRESENTATIVE SUE KELLY (R-NY)
U.S. REPRESENTATIVE SAM GRAVES (R-MO)
U.S. REPRESENTATIVE ROSCOE BARTLETT (R-MD)
U.S. REPRESENTATIVE TODD AKIN (R-M0)
U.S. REPRESENTATIVE PAT TOOMEY (R-PA)
U.S. REPRESENTATIVE ROBERT BRADY (D-PA)
RANKING MEMBER
U.S. REPRESENTATIVE BILL PASCRELL (D-NJ)
U.S. REPRESENTATIVE CHARLES GONZALEZ (D-TX)
U.S. REPRESENTATIVE DAVID PHELPS (D-IL)
U.S. REPRESENTATIVE JAMES LANGEVIN (D-RI)
U.S. REPRESENTATIVE ANIBAL ACEVEDO-VILA (D-PR)
 


*


PENCE: This hearing of the Subcommittee on Regulatory Reform and Oversight of the Committee on Small Business will come to order. I want to begin today by thanking all of those who will be testifying on our two panels for your time, on what turns out to be a rather auspicious day, and to say that we do anticipate other members joining us as we go forward on what will probably be two or three hours of testimony and questions.

I want to--several members of our Subcommittee indicated that they would be attending the Pentagon ceremonies this morning, which we certainly respect and appreciate, but wanted very much to go forward with this hearing, given the sacrifices that the various witnesses have made in being here, and for which we're grateful.

But, let me begin with some opening remarks. And, then, as I will introduce each of the first panel in succession, you will be recognized for five minutes of remarks and those of you that are more veteran here on the Hill will appreciate, the lights will signal you, green will represent the obvious; yellow will mean not step on the accelerator, but begin to slow down; and red, you will not be gaveled unless you seriously violate the red light. But, we'll just ask you to wrap up your comments as best you can.

We also would indicate that those of you that have submitted written remarks, those will obviously be made a part of the record of this hearing. And, we will hold questions, questions for all the witness, as I'm sure other members who will joining us as we go, questions will we hold until all of the various panelists have made their opening statements and then we'll go into the question and answer period.

With that, my parent's generation remembers where they were when Franklin Delanore Roosevelt died. Even elementary school children in my generation remember where they were when they heart that President Kennedy had been assassinated, as do I. Indelibly etched in our collective memories will be the pictures on television and the occurrences that occurred one month ago today, September 11, 2001. The events of 11 September have reverberated throughout this nation and the world, as I saw in evidence at a recent terrorism conference that I attended in Berlin.

Though at a glance, they mean seem pedestrians, today's hearing examines what are, in fact, significantly important economic consequences of the events of September 11. Immediately after the events, the Federal Aviation Administration, quite correctly, shut down all air traffic throughout the United States. During the shutdown, the commercial airlines estimated that they lost more than a billion dollars. Congress responded appropriately, in my judgment, with an economic package to stabilize commercial airlines.

However, the events of September did not just affect the commercial aviation industry. Shaken by concerns over the economy and the safety of air travele, Americans and foreigners have, as many of those who will give testimony today will attest, canceled plane flights, businesses of substituted video and telephone conference calls for face-to-face meetings that require travel. And people have simply canceled vacation plans in their entirety.

The economic consequences of the events of September 11 have not just been felt in New York City and in Washington D.C., but throughout the country and most certainly in my home state and home district in Central Indiana. And the impact has been most dramatic on thousands of small businesses that rely and depend on aviation for their livelihood. It's easy to understand the effect that the shutting down of commercial aviation had on airlines but the reverberations of 11 September permeate the American economy much more deeply.

Congress, so far has only dealt with the problems of some very large businesses. I expect testimony today will prove invaluable, as I'm sure my colleagues will agree as the Small Business Committee deliberates on the actions it can take to assist the small business community whose plight has been largely ignored by government to date.

Obviously, the businesses that serve aviation have been affected most dramatically. Smaller airports, like many of those in my district, whether they serve commercial airlines or general aviation have suffered substantially through reduced flight operations. Not only does this reduce the revenue streams of the airports, but it also adversely affects the businesses that provide support, such as catering services, fuel suppliers, aircraft maintenance and the like.

And we can't forget that access to air service plays a vital role in economic development, an issue that is of crucial importance to many members of the Committee and of this Subcommittee. Travel and tourism are an important sector of the American economy and the four corners of this country. The travel industry depends on air transportation to get many of their customers to destinations.

In the wake of the events of 11 September, airlines have seen air traffic reduced by 40 percent. And on the domestic and international flights that this Chairman has personally taken, 40 percent would be a very generous estimation for participation in the flight. When people don't fly, hundreds of thousands, particularly of small businesses suffer. And we're here to talk about that today.

PENCE: It's easy to picture the problems faced by concessionaires at Reagan National Airport, who've had no business for nearly a month, but what about a restaurant or a newsstand that's lost significant amounts of foot traffic because it's now located beyond the security checkpoint. One can also imagine the problems facing the rental car industry, where 90 percent of business is done at airports that are now suffering from substantially reduced traffic.

Travel agents have lost revenue from cancellation of airline flights, hotel car rental reservations, and cruises the same. Fine dining restaurants now serve fewer tourists and business customers, hotels, large and small, cannot fill their rooms. And not just in New York City or Washington D.C. hoteliers in Los Angeles County have already laid off 40 percent of their workers as an example, and closed entire floors in an effort, simply to stay afloat; taxicabs and limousines that take passengers to and from the airports have also seen severe reductions in operations in revenue. Given the concern about air travel, one might imagine that bus operators are thriving, they are not. They join the rest as they continue to struggle in this economy.

These grim data show that small business economy is, without a doubt, struggling. Businesses across the country are feeling the adverse effects of the events of 11 September. We will hear from a wide variety today of small business owners, of aviation related and aviation dependent businesses on their economic outlook.

I also look forward to their recommendations on legislative and regulatory changes that can be made to help them through this crisis time. For those suggestions are particularly timely as the Committee's examining changes to the Small Business Act that will provide greater assistance to small businesses that have been adversely affected by the economy as a whole and not just those in declared disaster areas.

I look forward to the testimony today. I want to thank all the witnesses for taking the time to travel to Washington D.C. and being willing to be with us. And given the importance of this hearing, I'd also like to offer each member of the Subcommittee present an opportunity to make an opening statement.

And, with that, I'd like to turn to the gentlelady from the Virgin Island, Ms. Christian-Christensen for her opening remarks and welcome.

CHRISTENSEN: Thank you. Thank you, Mr. Chairman. And thank you for holding this hearing. The events of September 11th clearly had a devastating affect on several vital sectors of our economy. Most notably have been the impact on the airline industry were estimates of losses are in the range of 2 to $3 billion, and industry-wide layoffs expect to exceed $100 billion.

To shore up this industry, Congress acted quickly and passed Air Transportation Safety and System Stabilization Act. The legislation provides 15 billion through grants and loans to assist the airline industry. This legislation was an important first step, but it is only the beginning, not the end. Still unresolved is a struggle facing thousands of workers in the airline industry who have lost or stand to lose their jobs.

U.S. Airways has announced they will eliminate 11,000 jobs, a 23 percent cut as the result of the attack. Congress must act with the same speed they did to come to the aid of the airlines and ensure workers, not only have access to unemployment insurance, because it is estimated that almost half of all laid off airline workers do not currently qualify for unemployment, but, all to expend health coverage through COBRA and provide training assistance.

While the challenges facing both the airlines and their workers have been well documented, what has been lost for the most part is the affect that these events have had on the thousands of small businesses in air travel and tourism industry. Travel agents have seen their number plummet with the possibility of losing a full one-third of the industry if action is not taken soon.

For the motor coach industry the picture is not much brighter. Tour operators report cancellations of between 30 and 80 percent amounting to 500,000 lost trips a day and job cuts of up to 20 percent. What is clear is that actions must be taken to help build a bridge across this difficult period.

Democratic members of the Committee have introduced H.R. 3011 that allows industries specifically affected by the events of September 11 to qualify for low-cost and no-cost loans to through the disaster loan program. This will provide some assistants while these vital parts of our economy get back on their feet.

The Committee should act on this common sense solutions and I would encourage my friends on the other side of the aisle who care about the plight of these small businesses to join us in passing this important legislation. These industries play an important role in the air industry. When we took up the airline bailout bill many said if we just made the airline industry whole, everyone would benefit. We did that.

But, what is clear is that whole airline industry depends on these small businesses just as much as they do the airlines, because if there's no one fuel, repair, supply or clean an aircraft, no travel agents to sell tickets, no buses to get travelers to their destinations, no hotels to stay at, restaurants to dine in, the bottom line is that people will not travel and the bailout for airlines will be in vain.

I represent the U.S. Virgin Islands, and for us tourist is 70 percent of our economy and we're very dependent on the airlines, so this is very particularly important to us. This scenario is exactly why we must act to assist small businesses and help them through the rough times ahead as American gradually regain a sense of security and translate that confidence into new travel plans.

I was also particularly pleased that this hearing is scheduled to look on the smaller aviation industry as well. In the past two days I've received several pieces of correspondence from small general aviation airlines in the Virgin Islands requesting my help in getting an FAA ban lifted on Part 91 flights from many foreign jurisdictions, which has caused a virtual shutdown on these small Virgin Islands airline operators.

As an example, we have the British Virgin Islands 40 miles away. For them to come in from there, they would have to go to the Bahamas about 1600 miles away and then come back to the Virgin Islands. That's just one example of some of the issues raised in those letters. I look forward to hearing the testimony of our panelists this morning.

And, once again, thank you, this is a very important hearing.

PENCE: Thank you, Dr. Christian-Christensen and thank you for being here on what we all know is a very busy day on the Hill and off the hill.

With that, as I mentioned before, for the benefit of my colleague, that we'll hear from each of our witnesses on this first panel and then we'll, each of us in turn, ask questions of the witnesses that are of interest based on your testimony.

Our first witness today we are very pleased to have, Congressman James Coyne, who is President of the National Air Transportation Association. The Congressman Coyne served in the United States Congress, had a distinguished career and then was a member of the White House Senior staff and became National Air Transportation Association President, representing nearly 2,000 large and small aviation businesses in April of 1994.

Since leaving the White House in '85, he has also been an author, a consultant, and a popular speaker around the country. President of the American Consulting Engineers Council, founder and President of the American Tort Reform Association, and also worked in the term limits movement around the country. His love, and commitment to aviation, though, is very likely what brings him to this panel today. It's been an important facet of his personal and professional life. Two business airplanes helped him to expand his business significantly in the 1970's.

He also regularly flew from Washington to Pennsylvania throughout his terms in Congress, and as an ATA President he's visited over 300 FBO's and aviation service businesses across the country. He calls McLean, Virginia home and is also married to an instrument rated pilot, as am I. So, Congressman Coyne, welcome, and you're recognized for five minutes.

COYNE: Thank you very much, Mr. Chairman. Congresswoman Christensen, it's also a pleasure to have you here. I should say that with a very small group of people who's members or former members of Congress or current members of Congress who are fortunate enough to have a wife as a pilot. It keeps us on the straight and arrow I know. And I'm very happy to be here.

I'm also very happy that Mrs. Christianson's here because we have had a lot of concern about the Virgin Islands. In fact, one of those 300 airports that I've been to has been down to St. Croix and also to other locations in St. Thomas and I'm very, very happy to discuss with you the problems that they've--but, first I'd like to describe, if I may, very, very briefly, the impact that our industry is enduring in response, as, in fact, a direct affect, of not only of the catastrophe that occurred of one month ago today, but also in response to the actions of our federal government in effectively responding to that crisis, but, also imposing very severe restrictions on aviation in America.

To put it quite simply, we face a catastrophe. A catastrophe unlike any catastrophe that has ever faced the businesses that make up aviation in America today. Never before, since the invention of the airplane have so many small businesses in America, in aviation, faced literal disaster, faced bankruptcy, faced the economic catastrophe that they face today. Why is this? Well, simply put, at you know, any business has to deal with the challenge of making a profit day in and day out. And these businesses have suffered in two ways.

First, their sales have been devastated because activity has been prohibited at most of these airports. Currently, today there are 280 airports in America that are effectively shut down to all VFR or aviation traffic, which in most of these airports represents between 75 and 85 percent of their activity. Today, 280 of these airports are effectively shut down. Many airports are shut down, as you will hear from other witnesses entirely, still today, airports here in the Washington area and New York area and other places.

And, in addition, there are airports in the far-flung corners of America from Maine to Alaska to the Virgin Islands, Puerto Rico to North Dakota, to the borders along our Southern boundaries. Where, because of restrictions on international travel, these airports are effectively curtailed. And I'd especially like to bring to your attention the hardships that these businesses are facing, which is principally because of the actions of the federal government, which have restricted the use of our airspace for the last 31 days in many different ways.

But, not only have sales fallen for these companies, in many cases to zero percent. But, in addition their expenses are going up at the worst possible time. Most of our member companies are facing increases in insurance. And I don't want to criticize the insurance industry, but, clearly, in this time of usual threat and concern, there are many people in the insurance industry that have rushed to cancel policies or to make it impossible to have affordable premiums.

Now, several of our member companies have been told that they've been literally shut out of insurance, forced to go, what they say is, naked in the insurance business. Others have seen insurance premiums increase by 20 or 30-fold, not just 20 or 30 percent, but 20 or 30 fold in many areas. In addition, new security costs are being imposed on many of these businesses; local airports are demanding new procedures, new staff to be hired, new equipment to be hired, to be bought.

So, at a time when their sales, in many cases, is only a tiny fraction of what it should be at this time, they're facing increased costs. The result is that many of these businesses have laid off virtually all of their employees. I know businesses that have had-- that are owned, let's say by a husband and wife, they might have 20 employees, all 20 employees are laid off and the husband and wife are coming into the office trying to barely stay alive, to keep afloat in these very hard times.

I'd like to especially mention one of our members who was invited by the Committee to be here. It's a typical small business in North Dakota; a place that people might say is far-removed from the disasters that struck in New York and Pennsylvania and at the Pentagon. But, even in North Dakota, just as you know, Congresswoman, in the Virgin Islands, this far from disaster has created economic disaster. The gentleman from North Dakota who was expected to be here and who had been invited is the owner of a small operation in North Dakota. The name of the company is North Country Aviation. And you had invited him to be here, I think, a Neil Matheson (ph), but, unfortunately, he called us a couple days ago and said there was just no way he could afford to leave his business at this time, to afford to buy the plane ticket to come here from North Dakota. And he asked me to speak on his behalf.

Even in far-flung North Dakota, they've lost about 70 percent of their business. They've lost over $100,000 just in the last 30 days. And that far exceeds their normal profit in a full year. Much of their business in North Dakota depends upon the ability to fly Americans up to Canada and to go on fishing and hunting trips. And they find themselves, because of new government regulations, unable to do that.

Same thing is true in Virgin Islands, as you know, where the principal operator, Balki Aviation, I'm sure you're familiar with, has seen its sales fall by nearly 80 percent over this past month. And they do not see any light at the end of the tunnel. So, what has effectively happened, if I may say so, Mr. Chairman, it's as though a tornado hit these airports, not one tornado but hundreds and hundreds of tornados. The small business community has frequently faced these kinds of disasters and looked to the government to for relief against natural disasters.

COYNE: Now, we hope that they can give financial assistance, loans, and other things in the same way, but not just to one airport with one tornado, but all of these airports with the disaster that has affected them all.

I thank you very much for the opportunity. If I may, I'd like my full comments to be included in the record, and I look forward to answering your questions.

PENCE: Without objection. And, Congressman Coyne, thank you for your thoughtful remarks.

With that, I will recognize Maureen--.

TARASCIO: Tarascio.

PENCE: Tarascio.

TARASCIO: Tarascio, right.

PENCE: Thank you very much. And is your husband Mike here as well today? He is? Good. Good to have you here. Maureen Tarascio and her husband began Air East Airways in 1982. Air East is a flight training school located at Republic Airport in Farmingdale, New York. Maureen is the operations Manager of the flight school. In 1994 the aircraft charter company began.

Maureen also took on the position of overseeing charter sales, the diversity of running both companies and the challenge which she describably enjoys, dispatching the company's leer jets to different destinations makes the job exciting and ever changing on the flight school level, whose membership exceeds 300 students and pilots. Maureen guides members to realize their dreams becoming either commercial or private pilots and Maureen Tarascio you are recognized for five minutes testimony before this Subcommittee.

TARASCIO: Thank you. Chairman Pence, Ranking Minority Member Brady, Congresswoman Christensen and members of the Regulatory Reform Committee and Oversight Committee, my name is Maureen Tarascio. I am the owner and operations manager of the Air East Airways, a company located at Republic Airport in Farmingdale, New York. I am also the Secretary of LIBAA. LIBAA is Long Island Business Aviation Association; it's a recently formed organization that represents the business aviation interests on Long Island.

Being from the Long Island area, as you all can understand, we're deeply affected by the September 11 disaster. We are continually saddened by the death and destruction we have experienced. My company is here today testifying on behalf of National Air Transportation association, an organization that represents nearly 2,000 aviation businesses. I would like to tell you a little bit about my company and how we're affected by the closure of Republic Airport.

My husband, my four children and I have worked 20 years to make the company what it is today. We began with one aircraft in 1982 and have built up the business to include our charter and maintenance department. We also recently completed our facility, a project which took us 10 years to complete, through a lot of hard work.

We are just like many companies in this industry. We work long hours to provide our customers with a place to train for their pilot's license. And working with many people who are looking to advance to that as a career. It is a love for aviation that drives us forward. Due to the closure of our airport, we are in jeopardy of losing everything we've worked so hard to create, the ramifications of Republic Airport being closed to most operations for nearly one month is immense. It has effected so many people, the worker who fuels the aircraft, the caterers, the limo companies, even the deli or restaurants outside the airport who had our customers frequent their establishments. And I want to mention that Republic Airport happened to be one of the busiest airports in the region. When we were closed down we normally had 580 operations a day, we were down to 26.

General aviation is not just about the person who flies the airplane, it's about the economic boosts that it's given to many industries related and unrelated. Between September 11 and October 6, Republic was closed to all operations except Part 135 Charter, which meant a 96 percent reduction in total flight activities. This resulted in a loss of $4,000 per day to my company and $200,000 per day to all the companies at Republic Airport.

At present, Republic is only partially opened. Air East is still only 50 percent operational. We need to have the restrictions lifted so we can regain the other 50 percent revenue needed. We are concerned that we have lost a percentage of our business that will never be regained. There are some businesses at Republic, which may never reopen. We have lost business because other local airports, such as ISLIP were open within a week after the disaster. So, we have customers that have gone to those airports to do their training.

One other great concern to us is the aviation insurance problem. We are already experienced problems within the first week after the WTC tragedy with the cancellation and resell to us of war risk coverage. We also expect to have major increases in our premiums when we go into renewal on our aviation insurance policy. There are some companies at Republic that did recently go into renewal and they told us they had a 200 percent increase in their premium. We had already experienced a 35 percent increase last year, last January. So, we can expect it to be phenomenal.

The problem with the insurance is that, of course, to make up for that, our rates are going to have to go up, which would make it difficult for the consumer to be able to afford it, be it flight training or aircraft charter. Survival of our industry will directly affect the national economy. We need funding to somehow make up for the losses we have incurred. We are hoping to obtain that funding in the form of federal grants. And we need this process expedited. Our future and the future of general aviation greatly depends on the federal aid our industry receives.

To sum up my testimony, first, I encourage members of the Subcommittee to ask the Bush Administration to life the remaining enhanced class B airspace restrictions throughout the country. And, second, I request that the general aviation, Small Business Relief Act of 2001 be approved and provide us with relief.

Thank you for giving me the opportunity to speak today.

PENCE: Thank you, Ms. Tarascio, and thank you and Mike for making the trip here and giving us some harsh facts, but very important facts for this hearing.

I am going to yield to the gentleman from Pennsylvania, Congressman Pat Toomey, who has a witness at the panel that he will introduce.

TOOMEY: Thank you, Mr. Chairman. And, thanks for your indulgence. I am, right now, another Committee that I serve on is marking up an important bill, and I will have to excuse myself, unfortunately, because we do expect votes for that markup. But, I wanted to be here to introduce a constituent of mine, who I'm grateful for his appearance today. And I look forward to his testimony.

George Doughty is the Executive Director of the Lehigh North Hampton Airport Authority in the Lehigh Valley of Pennsylvania, specifically, Lehigh Valley International Airport and this is a post he assumed in 1992, prior to which, Mr. Doughty was responsible for the management of Stapleton International Airport in Denver, prior to which, that, he has experience as Director of Airports in Cleveland, experience in the Baltimore Washington International and a number of other major regional airports, as well as many different capacities in the aviation industry.

He's been active in many of the aviation associations as a licenses private pilot and I know there can't be more than a handful of people in the entire country will more first hand knowledge and first hand experience in managing airports across the country, in particular, airports like Lehigh Valley International Airport, which play such a critical role in the economy of our entire region.

George, I appreciate all of your input and your willingness to be here today to share with us your perspective on how the attack and subsequent federal action has had an impact on airports, particularly ours, but others like it. And, I thank you for being with us.

PENCE: Mr. Doughty is recognized for five minute's testimony.

DOUGHTY: Thank you very much, Mr. Chairman, distinguished members of the Committee. It's my pleasure to be here this morning to represent Lehigh Valley Lehigh North Hampton Airport Authority, as well as the Airport's Council International of North America.

There have been, as we all know, significant impact from the events of September 11, in both our airport and other airports have seen the tremendous drops in business and traffic as result of that and also as a result of restrictions that have been placed on airports.

Lehigh Valley International is located in the Lehigh Valley between the cities of Allentown and Bethlehem, which is about 50 miles north of Philadelphia and 80 miles east of Newark. Our primary market area is about 2.5 million people and we have very important businesses, such as Air Products and Chemicals, Bethlehem Steel, Mack Truck, Merck and Company, and many others large and small in the region that depend on our airport to provide service for them.

Last year Lehigh Valley handled about a little over 1 million passengers. It was a record for us last year. And our business continued to grow well into this year, despite the fact that the economy was weakening. We have about 120 airport employees that work for the Airport Authority and about 700 employees generally working at the airport in airport related and airline jobs there. The airport's council International of North America, it is an organization representing local, regional and state governing bodies that own and operate commercial airports in the United States and Canada, which the Lehigh North Hampton Airport Authority is an active member and I'm an active participate, having served as Chairman of the Association in 1993.

There are really three basic ways that we have been affected as airports since September 11. We've immediate increases in operating costs as a result of the additional security requirements that have been placed and law enforcement requirements that have been placed on us by the federal government. There have been service reductions by the major airlines at nearly all airports. It's been particularly critical for small airports. That results in fewer travel options for people in our community and reduces the revenues that airports receive from airlines.

Fewer passengers mean less revenue for parking and from parking concessions and other airport businesses and to the community facilities that support airport operation. For Lehigh Valley International Airport, we estimate that over the next year we will see at least a $600,000 increase in airport operating costs primarily security requirements. The Airports Council International estimates that nationally since--just in the period of September 2000--before the period of September 2001 to 2002, additional security expenses will be $355 million, that's operations only.

Our revenue losses, Lehigh Valle as an example, we believe will be about 1.2 million for the next year. And ACI member airports have loss 185 million for the period just between September 11 and September 22. And they estimate that airports combined will loss $4.9 billion in the next year, including capital investment losses.

At airports, as you know, there are a number of businesses that support our operations, including concessions and other airline and airport supporting organizations. ACINA estimates a $2.3 billion loss from September 2001 to 2002 as a result of this reduction in business.

There are several things that the federal government can do to aid airports. And I would just like to list a few. ACI has submitted proposals to Congress for assistance to airports. They include broadening the rules relating to the AIP Program, the Airport Improvement Program, and broadening the use of passenger facility charge revenues to cover some of the extraordinary costs that we will be experiencing.

The ACI has also recommended that we seek congressional approval for the increase costs--appropriations for the increased costs in security requirements at airports that were mandated by the FAA. I would point out that the $5 billion that were given directly the airlines may not flow down through rates and charges to the airports. The airlines probably will not be excited about sharing that money with us because they have their own problems. They would like to see from airports and we will begin reducing costs and have begun reducing our costs, they would like to see lower fees. The reality is we'll probably have to charge higher fees and there will be significant resistance from the carriers to make those payments.

Therefore, we would appreciate, obviously, some action on the part of the federal government to reimburse airports for the direct costs of these security requirements.

Finally, there are a number of things that have occurred in the last several months, additional requirements, and various proposals for improvements to security. One of those was the deployment of the National Guard troops. Airports would very much like to see a much broader role for the National Guard, more flexibility in their use, which would aid us in taking care of certain security issues at airports that are currently being born solely by airport police and they are overworked and very much strained at the moment.

Finally, in reference to the number of additional security proposals that are on the table, we would hope that Congress would take the time to make certain that these are rational and effective proposals and are not just proposals that are designed to make people feel good. People will feel good and they will return to aviation if they are really secure. And we would hope that a great deal of thought is put in place to achieve those kinds of security improvements.

DOUGHTY: Thank you very much, Mr. Chairman, for the opportunity to be heree today.

PENCE: Thank you, Mr. Doughty. And we'll look forward to questions from the Chair and other members present, and thank Congressman Toomey, again, for joining us for however long his schedule with markup permits.

Our next witness to be recognized for five minutes is David Warthofsky.

WARTHOFSKY: Well pronounced.

PENCE: And David is partner and co-founder of Potomac Aviation Technology Corporation, a research and development marketing firm, created to develop technology, federal approvals in manufacturing and marketing of proprietary airport communications, weather and surveillance technologies nationwide, essentially works in the area of developing technology that brings that artificial intelligent and communications into the aviations communications environment, which probably, with the sum total of my understanding of that topic.

He has actually literally worked in the area of artificial intelligence since he was 12 years of age and he is also a private pilot of both fixed wing, multi-engine and helicopters. And, so, Mr. Warthofsky, it is a pleasure to have you and your perspective here and we recognize you for five minutes.

WARTHOFSKY: OK. Thank you very much. Even my in-laws don't quite understand what I do yet and we've been married for 14 years. I wish to thank the NATA for asking me to speak and to provide venue for this discussion. A little background, I am David Warthofsky, own and operate perhaps one of the most controversial airports in the United States called the Potomac Airfield.

The closest airport next to Washington D.C., it is quite literally located between Washington National and Andrews Air Force Base. To give a little snapshot of the setting, Potomac offers us a sort of vocalic setting, minutes from D.C. for all the numerous small businesses and services and that make up general aviation, at which there are many on the field. It's a smaller general aviation airport, 120 based aircrafts, single, light planes, propeller driven aircraft. It's also an R&D lab for some remarkable airport technology that's impacting airports across the country.

This is a wonderful location, usually. Since September 11 and to this day, Potomac Airfield remains under 100 percent airspace lockdown. While the airport is technically open, any aircraft that are actually airborne will be shot down. This is a kin to having a restaurant that while technically opened and serving a delightful brunch, has armed soldiers at the door with orders to shoot anyone trying to enter or exit. This is has not been great for business.

There are thousands of small businesses at airports like Potomac, highly still located within areas of airspace lockdown are subject to some of the other bizarre constraints that have come of the events of the 11th. All these businesses are withering on the vine and they're all actually withering rather rapidly. As I'm sure the NHE and other organizations have given you lots of information and details, on financial disaster and what have you. Let me do not take a few moments to read you more data, but rather, I'd like to give you my--a little background and my position and overview on the situation we're in.

First off, obviously, this, perhaps, doesn't get said a lot, we should thank the White House, NEC, FAA and DoD and whoever else is involved with efficiently locking down the airspace on the 11th, that was not an easy thing to do. It was the right move and if you stop to think about it for a few minutes, it was a very tough move to make. And my hats off to all the people involved in that.

Metaphorically, since September 11, the White House, NEC and government have been facing, in effect, a room full of a thousand shouting people all seeking urgently to have their own hardships addressed. Within the aviation industry many organizations and individuals have been barking at the FAA, ultimately the NEC to do something. Only recently have these organizations started to say what that something is.

It is my own belief that some of the early, somewhat bizarre regulatory actions and some still existing today are, in some manner, an indications of the governments, perhaps. Over eager willingness to try to do something in response to all of the barking, but without adequate times to understand or implement, perhaps, the most rational well thought out solutions, somewhat expected and perhaps even embarrassing actions have been taken. There are basically two views, from industry as these light aircraft cannot do much more damage than throwing a marshmallow at a window, basically, let's get back to business as usual, there's no real security concern.

From the defense standpoint, any act of terrorism can be destabilizing, including the throwing of marshmallows if thrown at the right window in the right manner, and at the right time, and my apologies to the marshmallow industry.

To implement rational workable solutions are going to take a little time, even of these past recent few weeks, the clamor is noticeably changed from a we want to here's how to fix it series of recommendations coming from industry. So those that say hurray, at long last the suggestions are beginning to replace complaints.

The proposed legislation on your table today, would offer some chance of survival for the portion of the businesses, families and dependents who are failing financially, and who are standing by as strong and as long as they can under the remaining airspace and operating constraints. They need to stand by basically while these operating constraints are being evaluated primarily from a security standpoint, and you're providing a means for these small businesses to hold out for the time it takes our government to basically fix the airspace it had to break up on September 11. You can help both national security and public security, in effect, by encouraging and assisting those thousand shouting people; you can help them calm down and get in an orderly line.

I believe this will allow the NFC, the FAA and others time to understand and to attempt to resolve the needs of these thousand shouting people in an orderly and rational fashion.

There security will, obviously, be the first consideration and their commercial viability the second. In the list of moral and ethical priorities for government after national defense and the preservation of our freedoms by your own possible actions today to help order and maintain public security, you have an outstanding opportunity to serve your people and your government. This, I believe, is one of the highest callings of an elective body and I encourage you to do your part.

Thank you.

PENCE: Thank you, Mr. Warthofsky, and we'll look forward to more about marshmallows during the question and answer session.

Our last witness on this panel is Mr. Clinton DeGroot, if pronounced that correctly.

DEGROOT: DeGroot we go by.

PENCE: Thanks. DeGroot. I appreciate the correction, the owner and the operator of Spencer Avionics in Spencer, Iowa.

DEGROOT: That's correct.

PENCE: Has traveled a long distance to be with us today, a native of Northwest Iowa, Mr. DeGroot worked most of his adolescence helping his father with his installation business, currently lives in Sanborn, Iowa with his wife and his four children. He flew his first airplane at age nine, and in 1982 jointed the U.S. Armory as a helicopter mechanic, graduate of Spartan School of Aeronautics in Tulsa in '87 and purchased Spencer Avionics from the previous owners in 1998, and recognized for his valuable, practical perspective, as we've heard from others for five minutes.

DEGROOT: Thank you, Chairman Pence, and members of the Subcommittee and Regulatory Reform Oversight. I'd like to thank you for this opportunity to testify before this Committee on behalf of Spencer Avionics and the Aircraft Electronic Association. As New York and Washington continue to recover from the events on September 11, I wish I express my deepest sympathy for the families and friends that have lost loved ones in this tragic event.

As a result of the terrorist attacks, many aviation businesses nationwide have suffered unprecedented financial hardships. Hardships that are a direct result of the security measures put in place by the federal government. The Aircraft Electronic Association represents over 1,100 aviation businesses that, like mine, specialize in avionics maintenance, installations and electronic systems for general aviation aircraft.

AEA members have been engaged in every level of general aviation, although only nearly 75 percent of our memberships are small businesses, having less than 10 people. Spencer Avionics is one of those businesses. While general aviation includes many large turban- powered aircraft, we tend to specialize in smaller, single engine and light twin aircraft, often flown under visual flight rules. I'm a Veteran, a father of four children, and, until three years, I worked for someone else. I now own a small four-man shop that my wife and I operate.

As a direct result of the grounding of all the general aviation aircraft, my shop suffered an immediate nine-day loss, exceeding $15,000, and continues to loss money. Many of my customers do not have access to my shop because of the temporary restriction regarding the Class D airspace. As a small shop owner, I have had to cut my own personal pay by one-third in order to keep my technicians working and the cash flow flowing. We are far from New York and the government security measures put in place following the terrorist attacks, and have had a direct effect on mine and other avionic shops' ability to operate.

Like many AEA members, my shop draws customers from a relatively small radius of 250 miles. In my case, this radius includes the Minneapolis Class B airspace, which is closed to VFR flights at this time. While the government made significant progress in the first two weeks returning commercial air aviation to normal operation, there has been little or no progress in the past two weeks getting general aviation and the small businesses that support them back into operation.

The current flight limitations exclude VFR into major metropolitan areas and U.S. travel of foreign aircraft. Airspace within the United States is divided into six separate categories. Class B is the highest classification of airspace below 18,000 foot, with the highest degree of positive control of all airborne traffic. There are 28 designated Class B airspaces, typically located around major airports and large cities. These Class B airspaces have been closed to VFR flight since the September 11th. The businesses located within these airspaces have been unable to conduct VFR customer's operations.

AEA members rely on both domestic and international aviation customers. Domestically, the inability to receive aircraft from the customer and the inability to return the completed aircraft to the customer, severely crippled the ability of small business to meet the demands of their customers at normal operating levels.

Internationally, the United States, our maintenance facilities are recognized worldwide for their quality work they perform. For many international operators, these maintenance facilities are the facilities of their choice. The current band prohibits international customers from delivering these aircraft to U.S. facilities for their scheduled and unscheduled maintenance.

Like many AEA members, my insurance provider has 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 three companies that provide insurance for my shop. In the past two years my insurance has already increased 56 percent, although I have not had a claim against any insurance company.

Since the events of September 11, AEA members have seen on average a 45 percent decrease from their business with specific members suffering much more. I've described the losses that I have experienced in Iowa, other AEA members have had similar and in some cases, worse losses than mine. We as small business owners are not looking for some kind of government subsidy. 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 mismanagement. However, the government can help us survive the disaster on September 11, and the federal government security measures implemented as a result of the disaster by tax relief or by making low-interest loans available.

To help the aviation small business return to work, the Association requests from this Committee, one, encourage the FAA to develop a plan that would allow for delivery of U.S. registered aircraft to repair stations located in the 28 metropolitan areas and enhance Class B airspace. Two, to encourage the FAA to develop a plan to allow delivery of foreign registered aircraft to repair stations, to expand the boundaries of the disaster area to include aviation businesses that have incurred financial hardships as a direct result of the federal security measures put in place following the terrorist attacks in new York and Washington. And, four, to investigate and, if possible, stabilize insurance premiums, charge to general aviation companies by the insurance industry.

I appreciate the opportunity to testify before this Subcommittee on behalf of Spencer Avionics, my employees and the members of the aircraft Electronic Association, thank you very much.

PENCE: Thank you, Mr. DeGroot. And we will commence with questions to the panel. The Chair will have a question for each of the witnesses and then will yield the gentlelady from the Virgin Islands for any questions. And then we'll do another round if we're up for it and they're up for it.

Let me thank all of you for an outstanding presentations, very informative and very helpful to my understanding of this area. Beginning with Congressman Coyne, you raised an issue that our last witness, Mr. DeGroot, also raised having to do with expenses going up and specifically, and I don't remember from your testimony, it appears in my note, but, if you specifically referenced insurance costs. What--if you an elaborate just briefly from your perspective how serious is the type of increase in aviation insurance we're talking about, we've heard 200 percent suggested or about the size, will be that, more or less, otherwise? And what's driving that?

COYNE: Thank you very much. First of all, I should explain that in aviation insurance there are different products that different aviation companies buy. These range from what is typically called the general liability, hanger keepers liability, hull insurance on aircraft, operational insurance, renter insurance, and war risk for terrorism insurance, just to name a few.

COYNE: Each of these products, each and every one of them, are expecting dramatic, or already have experienced dramatic increases just in the past 30 days.

The most extreme effect, as you might expect, has been on what is typically called war risk insurance. Of course, it's a little hard for me to understand what additional risks with regard to war or terrorism a facility in Iowa or Duluth, Minnesota or St. Croix, Virgin Islands really faces. But, really, it's, I think, largely an issue of the insurance industry trying to spread the terrible loss that they've endured over the last 30 days among anybody that they can find, anywhere they can find a wallet, a live wallet.

So, we're expecting to see in the war risk insurance area increases of up to, perhaps, as much as a 1,000 percent. One specific example I can give you, one of our members was--had a premium of $2,300 for war risk insurance. The first week after the disaster they received a letter, as virtually everybody in aviation has done, I think, without exception, from their insurance policy saying that their previous war risk insurance is now void. And if you want to get new war risk insurance, give us a call and we'll give you a quote if we can get you the insurance at all. The one that I was telling you about that was a $2,300 premium last year was able to get a quote of $57,0000. So, that's an incredible increase.

Similarly, we typically are seeing increases in general liability of around 50 percent over the last 12 months versus this year. Hull insurance, in some cases, not only is the premium being tripled, or doubled, but the coverage is being cut in half. We might have been able to get a $10 million policy last year we're lucky to get, in some cases, a $5 million policy. Some companies are only quoting them million dollars' coverage. And, the most extreme example that I've seen is one company that had a $50 million war risk insurance policy, it was reduced to $1 million and the premium for it was $200,000.

So, we have very, very irrational market responses right now in insurance. And, in many cases, it is leading people to make the terrible decision to not carry insurance, which, obviously, doesn't help anybody. Or, in other cases, making the decision to just go out of business.

PENCE: Thank you. Maureen Tarascio, your presentation about your experience at Republic Airport. I think I heard you right to say that there were 500 operations a day prior to.

TARASCIO: Almost 600, actually.

PENCE: Almost 600 a day, down to 26.

TARASCIO: They were down to 26 until we opened on October 6. We do have 40 percent operational status back at this moment from Saturday. But, we're still 60 percent down, as I said, we still have restrictions, the VFR rental pilots, the VFR 91 cannot go in or out yet.

PENCE: Great. That's helpful. Let me ask you two very quick questions, if I can. Number one would be, how would you have characterized the state of your business prior to September 11? Was it a good year, mediocre? I grew up in a small business family, it's always a bad year.

TARASCIO: For the flight school, we were very busy this summer.

PENCE: OK.

TARASCIO: This was our busiest year. This was our first year that we completed a full year in our new facility, so we were very, very busy with the flight school. So, of course, we went from being very busy in the flight training. The charter was on the slow side, that picked up a little bit because people could not get around with the airlines. But, as far as the flight school goes, of course, that went from being very busy to no activity.

PENCE: Would you of characterized, based on conversations with colleagues and friends, would you of characterized the health of general aviation around the country to be relatively the same as yours?

TARASCIO: Well, as far as I know, talking to other entities, ever body pretty much--well, I think everybody was closed down for at least around the country. And there were, I believe, 100 airport affected like myself that are still affected at this time around the country.

But, in talking to people everyone took a very big hit. It's going to be slow coming back. We're still, like I said, not fully operational. And it's a real concern. There are many, many people that are at the point of thinking about closing their doors.

PENCE: What's the--last question from the Chair, what do you think is the most effective thing that we can do? There's been some talk about legislation that's been proposed and is in some part the topic of this hearing. One of the things that we did in the what gets called the Airline Bailout Bill for the major commercial airlines is we addressed the issue of insurance in part. Should the federal government become involved in providing or facilitating the provision of insurance or would it be more significant to see deferments of principal and interest payments on certain loans?

TARASCIO: Well, I think first of all, if we could regulate, unfortunately, I think that the insurance company is taking a loss they're going to pass this on to us. If we could regulate what the insurance company cap is, maybe what they could charge us, because it just seems that in times like this they're to, of course, increase their rates to the point where it won't be affordable for us to operate. That's one thing that we would like to see.

The second thing is we are in contact with FEMA at Republic Airport we've been considered, they've brought Suffolk County into the FEMA package, but they are only talking loans. We really--we've kept our employees. I did not lay people off, but, of course, it was very difficult. There were a lot of people laid off at Republic Airport. But, we're looking for funding in the form of grants. We would prefer to have the, of course, we want the grants because we had to keep the insurance payments, the loan payments going, and all the other expenses to keep us operational. And, of course, be ready to operate any moment when the airport was opened.

And, I have to be honest with you; we weren't told when the airport was going to open. So we were waiting for any day type of thing. And we just didn't want to lay or staff off so that we weren't ready to return to business.

PENCE: OK. Mr. Doughty, during your testimony I was trying to keep up with some of your recommendations from Airports Council International and others. There was--you said that essentially from your perspective there were three ways that general aviation or smaller airports like Muncie, Indiana's airport that I represent have been affected, additional operating costs, I caught, reduction in revenues in the other, but I missed, what's the third big pillar in that?

DOUGHTY: Well, in the case of--and I guess I just divided the loss of revenue until two categories.

PENCE: OK.

DOUGHTY: This was basically it was, in our case, airline revenue loss. We're a small air carrier airport, as it is, we loss revenues from airline and loss of flight opportunities, loss of schedule. And, in our case, we may have lost 10, 15 percent of our flights, very small airports with maybe only one airline could of lost the entire-- all their service.

The domino effect of that, obviously, is all the other ways you get revenue from those people, like the parking lot and the rental cars and all that.

PENCE: OK.

DOUGHTY: That revenue was a secondary impact.

PENCE: OK. And, your thought about recommendations, which this Committee is certainly very interested in, greater flexibility in the Airport Improvement Program to allow--could those resources be used to address some of the new security strictures being posed on airports?

DOUGHTY: It could be--.

PENCE: --Number $600,000?

DOUGHTY: Mr. Chairman, I think it could be, in a limited way, by broadening those rules to allow airports to include additional security items that are not necessarily on the list of eligible items. And ACI has made a specific proposal on that.

Also, the PSC revenue, which we receive, which is the $4.50 or $3 depending on what airport from passengers from each passenger, if that could be bordered, and there probably is more flexibility with that money to even include operating expenses being funded by PFC's as well. That would be helpful. It would not be a panacea by any means, but it would be helpful.

PENCE: Mr. Warthofsky, with others indicating in their testimony that they're maybe back at 40 percent, my heart really goes out to the Potomac Airfield and to what you're dealing with, in obviously a high national security area. I want to be very, very clear on your testimony because we did just reopen Reagan National Airport to some extent.

WARTHOFSKY: Yes.

PENCE: Is it your view that a certain type of general aviation does not represent a significant security risk the way a large commercial airline does? And let me--I want to be very cautious about not seeming flippant or suggest that you were being flippant, but you have such a background in this area, I want to make sure I understand.

WARTHOFSKY: Absolutely. There are a couple of dimensions to it. Obviously, the day after this event, I naturally asked a close friend, whose in Defense Intelligence whether I should move my whites and pinks to the outer banks, logical, you know, you start thinking about these things. And we were talking about the practical threat that a light aircraft represents. And the practical threat the light aircraft represents is, in fact, so limited by its payload; you might as well say the obvious gas, biological, or explosives, that these aircraft cannot carry enough to actually accomplish anything tactfully significant.

Another friend in the security industry, I guess you would call it that, made the counter point in another discussion that any act however trivial can be highly destabilizing if it makes people scared. And I believe that part of what the National Defense and the National Security Agency are wrestling with is that 98 percent of the public has a perception of light aircraft, regardless of weight or size that has a perception of light aircraft as being something hazardous. And there needs to be some kind of procedures that convey a sense of positive control within what are considered, these sort of high risk areas. And there are number of things being discussed now.

One of the other issues is that historically the FAA, while it has had jurisdiction, hasn't finally managed the whole Part 91 question. The FAA's primary mission has obviously been airlines. And so, for example, one of the issues is a Cessna 172, weighing 2,300 pounds is operating under the same category as a corporate Gulf Stream 3, and if you release one, you release both. One of the problems that is being discussed at National is how you preclude bin Laden's Airline's gulf Stream Three on to by nominees from, instead of landing Runway One at National instead it ends up doing a touch and go and then barrel and roll into the White House. And so how do you draw distinctions between these things?

I don't believe that there is any--while a number of the government agencies are trying to come up with solutions, that, I believe the phrase is, that is by all the related trade groups, I don't think a solution can come that was going to make them all happy. You will never get them all approved. You will never get the--and the FAA wants to be cautious to try to get everyone happy before they submit something, but I just don't think it's going to get there.

The fastest to implement things are actually procedural. There are procedural things that I've been in discussions with that would convey, in effect, an absolute positive control over aircraft before the depart. There are methods for doing that that, in effect, can set an iron curtain around the 25-miles for anyone that is not already known it, that has already been identified. Whether that solves the question of the Gulf Stream Three going to National Airport, I just don't know. It depends on--in effect, where you draw the lines. And, you know, that's part of the problem. It's sort of an all or nothing in the whole Part 91 world right now.

There have been a number of things that have come out, these sort of weird 25 miles, the 18 miles and the 6,000 pounds and then 4,000. And, in a sense, what people are doing is they're arguing about what weight of what bicycle should be permitted how close to the White House. It's really sort of irrelevant. And, ultimately, it's going to require some positive control procedures, which there are some actually rational and relatively easy to do, but there's some staffing questions really at the FAA flight service station level and they're going to be some pissed off people to put it bluntly.

But I think the only thing that the National Security Council has probably actually had good intentions here, but, I think, you know, their mission is national security, not economic recovery. And the only things that's going to crack this open is a rational series of steps coming from the Defenses Intelligence Agency that are acceptable, both in terms of the security standpoint, and also in terms of the reassurance to the general public.

PENCE: Thank you, that's helpful. I'm going to come back to Mr. DeGroot, but I want to yield to Dr. Christian-Christensen, Congresswoman from the Virgin Islands for any questions she might have.

CHRISTENSEN: Thank you, Mr. Chairman. And it's clear that the issue of the Class B airspace restrictions is one of the major ones that is a concern to everyone. And I'd be happy to join with you in writing to, or meeting with, the Secretary Minetta and the FAA Administrator to explore that issue more.

We did pass, what some refer to as a bailout and others refer to as a financial stabilization package for airlines and what it does is it provides funding to make up for the losses since September 11 and also it would provide for any increases--to pay the costs of increases in insurance for airlines. For those of who deal specifically with aircraft, does it get to smaller airlines and people who do airline rentals at all?

COYNE: The short answer to your Congresswoman, is no. It's possible theoretically for an airline not to pass any of the funds through, but to conceivably pass through some indemnification on war risk insurance through to a contractor. Unfortunately, the airlines to this date really haven't done that except in the very, very few limited occasions, and mostly only to their very largest contractors. But, to the thousands and thousands of businesses across the country who fuel, let's say an American Airlines flight lands at St. Croix, that contractor is not getting any relief, not getting any funds, essentially has gotten nothing, zero, out of that $15 billion that was passed in that legislation.

And, of course, at the time we, and everybody else in the industry, came to Congress and said cannot we include in this legislation a paragraph, a sentence a chapter that would provide some relief to employees, to contractors to others, and, as you know, at the time, they was a great rush to do something immediately and there was a lot of pressure to just sort of not open the bill for any amendments or anything.

And, at the time, most people that I talked to here in Congress said, well, there'll be an opportunity next month for the Small Business Committee to deal with the concerns of small business, for the Aviation Subcommittee to maybe deal with other issues, tourism and so forth. And we here are really looking to you to provide that legislative product. And, without it, I don't think we'll get any-- expect any relief from that earlier legislation at all.

CHRISTENSEN: Did anyone else want to respond? OK. That opens up two other questions, referring one to the Transportation Committee and they're looking into these of airport trust fund money to provide some assistance to airport-related businesses; Mr. Coyne, or anyone else, what would be most helpful for the Transportation Committee?

COYNE: Well, certainly with regard to the expenditures that are going to be expected in the area of security, the costs that these many businesses, whether it's a new badging or identification system, or a new electronic background checks or new fences or new screeners or whatever, it absolutely makes sense that the aviation trust fund should be used to finance the security expenditures.

Just as I'm sure the airlines are expecting the aviation trust fund to pay for new security expenditures that they may face in terms of baggage screening or what have you. However, for the core issue, which is the losses that were endured, the airlines, of course, got $15 billion in grants and loans to cover what essentially was three days of being out of business because of federal action.

Our industry, many of them are still out of business entirely, as David in his case and many others, because of--solely because of the actions of the federal government. And if there's an argument that the airlines should get $15 billion for three days of being out of business, what's the argument that's fair for people like these businesses who are still out of business and, in many cases, I'm sure in David's case, there's not a single person anywhere in government that will tell him if he'll be able to come back in business tomorrow, a month from now, a year from now, or ever. And, so if they won't give us that answer and they're the ones that have caused us to go out of business, and they gave all that money to the airlines, how can they not, how can government not respond to these same businesses who are hurt much, much more severely?

The airlines can go borrow money. They can go do all sorts of things, there's nothing, nothing, zero that these business can do except reach into their own pockets and take money off the table that was going to their children or whatever, to keep their businesses afloat. And they're looking to government as the only hope for relief.

CHRISTENSEN: We had a hearing yesterday at the Full Committee with the Small Business Administrator and one of the solutions that we're looking at is making effected businesses eligible for low-cost or no-cost economic injury disaster loans. How far would that go to help, somebody else?

COYNE: Well, I--somebody else.

WARTHOFSKY: OK. I can give you a little reaction as we actually own the underlying airport and there are numerous service businesses on the field. How you connect those revenues to the service businesses on the field, I don't know, frankly. It's easy to identify, you know, the general aviation and the industry is split into far more layers than just the handful of airlines.

CHRISTENSEN: Right.

WARTHOFSKY: And how you actually try to cover all of those, how you try to identify them, I think, is a practical matter by the time you figured it out, a lot of their phones will be disconnected.

DOUGHTY: I'd just like to say that low-interest loans would help us get through this short time. I think general aviation will make a comeback eventually. But, we need a bridge to gap--for this gap from the shutdown to where we can get our businesses back on their feet again. It doesn't necessarily have to be a no-interest--I mean a no- interest loan would be great, but I don't think the government can afford it.

CHRISTENSEN: What would--if we were to reduce the interest rate, what might be a workable?

DOUGHTY: 1 percent would be great, but--no, but I think most businesses would be happy with maybe three to 4 percent. That'd make it a manageable number for us to deal with a monthly basis.

CHRISTENSEN: OK. And the disaster loan is at about three or 4-- about 4 percent, if we were able to extend that.

DOUGHTY: That would be great for my business personally, I don't know about David's business.

WARTHOFSKY: Yes.

DOUGHTY: He needs to get flying again, is what he needs--.

CHRISTENSEN: Right.

WARTHOFSKY: Right. The airspace is a critical thing. Right now the suspension of all airspace is sending a very strange message to people. It's perfectly reasonable to get back to your lives, but, oh, no, oh, God, not around Washington, we'll shoot you down.

We saw about 20 aircraft depart the first night that the clearances were quite literally, I was dealing with Washington, Washington departure, the aircraft will be off the ground 22 minutes after the hour, and it is void at 25 minutes after the hour, if it takes off 26 minutes after the hour, it will be shot down. That-- these procedures are terrifying people and then also the FAA, I was at a FAA Headquarters meeting, they're also trying to figure out what they can do. And one of the things I mentioned is just if they can issue a press release that at least they're trying to address this and try to reduce the level of terror, quite literally, that inadvertently has been caused by government action within the industry, you know, those kinds of things can go a long way.

There are alto of things the FAA and the DOT just don't have jurisdiction over right now.

COYNE: Ms. Congresswoman, if I may, I would like to really stress these airspace issues one more time. We really haven't talked about it much, and I know its not normally the purview of this Committee, but each and every individual in Congress can help solve this problem, working with the White House, the FAA, DOT, as you mentioned. The situation that involves the virgin Island is on the face of it, absurd, it is merely absurd. It seems to me, I hate to say this, but it seems me that the FAA when they rushed to enact the airspace rules regarding foreign aircraft coming into the United States, they acted as though Puerto Rico and the Virgin Islands were foreign countries. And they make it easier to get to the United States from the Bahamas.

CHRISTENSEN: Yes.

COYNE: Than they make it to get from the British Virgin Islands to St. Thomas, which is what, 15, 25 miles, or just to get from Puerto Rico to the St. Croix, both of which are part of the United States. Somebody has got to go to the FAA and say that this is fundamentally wrong, stupid and easily fixed tomorrow. They could issue a no tem tomorrow to deal with these international issues all around the United States that would solve this problem, because it doesn't do anything to improve security at all.

WARTHOFSKY: If I may, I think actually the FAA understands that. The problem is that no one's paying any attention to the FAA either.

CHRISTENSEN: OK.

TARASCIO: Can I say one thing about the--.

CHRISTENSEN: Sure.

TARASCIO: --You were asking about the low interest loans. Like I said, we've been offered something by FEMA at Republic and we had a meeting the other day and the people that came were very disheartened they were very upset. We have helicopter businesses that aren't able to operate at all, we have, like I said, flight schools, we are still not fully operational right now. We're still not allowed VFR 91. And everyone estimates that it's going to be about six months until we get back to normal status, normal operations. And, for us to have to take a loan and repay money that we've lost in that time period, which is going to be great. I mean, like I said, we're losing $200,000 per day amongst all of us, it's just phenomenal for us to do that. We need to get funding to put us back where we need to be and we need to get the airspace reopened so that we can start getting back the business that we've lost.

Otherwise, it's a band aide effect.

CHRISTENSEN: Right. And I hear urgency.

WARTHOFSKY: Yes.

TARASCIO: Yes.

CHRISTENSEN: Before everything is lost. But, one of the things that we're also proposing, I was just reminded, is that delaying the payments of those loans under it would be 3011, under H.R. 3011, for at least a year. I think--do I still have a little bit of time?

WARTHOFSKY: I was just going to say, you know, the terms of the loan the terms of the capital or whatever are almost secondary. One of the questions is simply administrating it. I might suggest that there are, I believe, 14,000 airports in the United States, of which 3,500 are eligible for AIP. In the meeting yesterday I was informed that the FAA feels it's an administrative matter for them to decide that the other airports can be made eligible for ARP. Right now they are cut off.

I would also make the suggestion that the State Aviation Administrations are, in fact, the closest agency to the airports and the operations within a state. And that rather than having the FAA manage this, which is used to dealing with airlines and commercial airports, that you actually get the State Aviation Administrations involved with this, because they know what's going on at the grass roots level. The FAA is actually very far removed.

COYNE: If I could make one final point, very briefly. It has sounded; listening to us today, as though we're only trying to help these businesses for their own, perhaps, selfish need, or self centered need. But, it is not that at all, I mean, if these businesses are allowed to go out of business, the whole community suffers. I mean if Balki Aviation is not there at, what it is Alexander Hamilton Airport or--?

CHRISTENSEN: It's now Henry B. Rosen Airport.

COYNE: OK. If that's not allowed to exist there, then the ability of that community to have the benefits of our air transportation system are forever gone, same thing for all of these airports. So, we're not just doing this for the benefit of the businesses that are faced bankruptcy, but, for the broader disaster impact on the citizenry as a whole.

CHRISTENSEN: Thank you. I just wanted to, I didn't have a question for Mr. Doughty, but, I just wanted to say that I have been put under some pressure to appeal to my Port Authority Executive Director to lower fees and you've helped me to understand why he's putting up the resistance. I thank you for helping me to understand that, the other side of the issue.

DOUGHTY: Airlines have actually asked us to put our bond ratings at risk, put our own business at risk to help them and lower fees to them. And that pressure is going to be severe, particularly on very small airports that may only have one airline, cause that airline can simply say to the board we're pulling out if you don't give us 20 percent of the landing fee. And it's a difficult political situation for many small airports.

CHRISTENSEN: Yes. Mr. Chairman, I don't have any other questions. I just wanted to enter for my small district I have five letters dealing with small airlines and airline issue and 91 part--.

(CROSSTALK)

COYNE: That's all right; even the FAA finds those confusing.

CHRISTENSEN: And the Part B airspace. So I'd like to enter them for the record.

PENCE: Without objection.

CHRISTENSEN: Thank you.

PENCE: I thank the gentlelady for Virginia, and we'll enter those into the record of this hearing.

PENCE: One final question for this panel before we take a five- minute recess and reconvene with our second panel, to, Mr. DeGroot who clearly, I think traveled the farthest today and for which this Chair is very grateful. You're also a veteran?

DEGROOT: That's correct.

PENCE: And, there's been a lot of talk about regulatory reform at the FAA to address the economic struggles that we've heard in evidence today. But, any specific regulatory changes this Subcommittee should look to encourage that would not compromise, from your perspective as a veteran, national security concerns?

DEGROOT: Well, when I was Korea--I was talking to the other people here before this meeting, we had corridors that went over Saul, and they worked for us in the military and we also had private aircraft that had to fly down them same corridors. If we could get some kind of wide corridor to at least get these guys out to a training area to do some flight, or get out to get their VFR's completed. I mean, Minneapolis, there's nothing after Minneapolis, besides my shop. But, if they get a corridor to come out of that, Minneapolis or come into Minneapolis, I think that's something that the FAA or the ATC could control fairly easily and get these small aircraft flying.

But, if they have this fear that they're going to be shot down out of the sky if they go out of this corridor, I, myself, probably wouldn't fly either. I'm a pilot.

PENCE: Would it make you (INAUDIBLE)?

DEGROOT: Yes. And, so, I think they have to make these corridors wide enough to where we can get the airplanes in and out and not have the fear of doing something wrong at the same time.

PENCE: Ok, very good. Let me thank all of the panelists. I know I speak on behalf of Congresswoman Christian-Christensen when I say this has been very illuminating and, obviously, each of you liquated yourselves extremely well. And, certainly motivated these members on this Subcommittee to be become very active in this debate.

I will publicly say that I will take my colleague up on her offer to address an urgent letter regarding Class B airlines to the FAA and to the Administration. And we'll look forward to collecting more colleague signatures on that issue.

With that, we will take a five-minute recess and be back, ask our second panel to go ahead and head to the table and we'll be in recess for five minutes.

PENCE: This hearing of the Subcommittee on regulatory reform and Oversight entitled September 11, 2001, are America's small businesses still grounded will reconvene after a brief recess. I thank the second panel for joining us and I'm anxious to hear your remarks. I trust most of you were in the room as we explained the ground rules, five minutes of remarks with an eye on the little box in front of you, and, both I am my colleague and any other colleagues that join us will reserve our questions until after each of the panelists have testified.

I will make mention of the fact that we are anticipated votes after 12:15, in which event, we may need to either recess or even possibly adjourn to accommodate what should be a busy day of votes on the major legislation at the Capital.

Bonnie Adams is our first witness on this panel of Lewiston Travel Bureau. She is an active member of the American Society of Travel Agents, has owned and operated her own travel agency for the past 26 years, in addition to her work as President of the Lewiston Travel Bureau and member of the ASTA Subcommittee on Government Representation, Adams is a member of the Small Business Administration main advisory board, very good.

She has served as a White House Delegate on Small Business, President of the main chapter of ASTA and Chairman of the ASTA's national Legislation Committee. She brings enormous credentials and a daily practical experience to the struggles that small businesses are facing in the wake of these events and is recognized for five minutes of important testimony.

ADAMS: Thank you very much. Thank you, Mr. Chairman and Ms. Christensen for the opportunity to speak to you on behalf of the American Society of Travel Agents and the nation's travel agents. I am a travel agent. I have owned and operated my own travel agency for the past 26 years. My agency is a prototype of the average American travel agency with about 3 million gross sales per year.

Prior to September 11, I employed six full-time people, all actively engaged in the promotion and sale of travel services.

ADAMS: Since September 11, the agency has had a negative cash flow of $32,000. I continue to loss $4,000 a week. My story is typical of what is happening to travel agencies across the United States and in the territories. I have laid off three of my employees and have not drawn a paycheck for myself since September 11. I have plunged every penny I have into my agency just to keep my doors open.

I am still in business in large part because I've been able to obtain the forbearance of others. My landlord has agreed to defer rent payments for three months. He gave me free lights and heat. My banks deferred loan payments for two months. My local credit union agreed to defer my car payment.

Mr. Chairman, unfortunately, all that generosity and cooperation is not enough. I have, at best, three weeks left to keep open, after which time I will loss my career of 33 years, my business, the roof over my head, the cars I drive and every penny I had in savings.

This is my story, but it could be anybody's story who owns a travel agency in the United States today. Indeed, many travel agencies across the county has been less fortunate than mine and are already out of business. On September 11, the travel agent industry was just like the airlines, already struggling with the severe problem. When the terrorist's attacks brought a halt to the sale of travel in all forms, new business stopped and has not yet begun a significant recovery. The details of the financial losses is set out in the written testimony and the exhibits, for the period through the end of 2002, ASTA estimates the total loss for all product lines will exceed $4 billion.

It took 18 months for travel to return to normal levels at the time of the Gulf War. This time it can't be expected--it can be expected that any modest rebounds in business will be dampened and that we will again approach that of the ground stop days as we enter new phases of our national response. The average number of agency employees in a location was six, just like my agency.

In normal times these small businesses handle an enormous volume of air travel, through August of this year, travel agencies sold more than 48 billion in airline tickets accounting for 127 million airline sales transactions. This business has shrunk to almost nothing since September 11. This is normally the peak season for holiday bookings. That business is at a stand still. Large group bookings made for future travel have cancelled. The details of a small sample of these stories are set out in Exhibit A to our written testimony.

We continue to receive similar stories from around the country. Travel agents and at home retailers of travel services number about 300,000. ASTA estimates job losses in the 100,000-range if immediate action is not taken to help them. Travel agencies do not have cash reserves or other assets to use as collateral for regular bank loans. The federal government is where we have to turn. We have no place else.

If we do not get an immediate cash infusion in the form of no interest of low interest, uncollateralized disaster loans that are below the current FBA economic injury disaster loan level, we will all disappear and loss our assets and be forced into business and personal bankruptcy. We ask that such loans are industry based, versus regional or size. The loan should be based on ability to repay and have loan forgiveness for agencies on the verge of bankruptcy. We seek loan abatement on both interest and principal to help travel agents get back on their feet.

I am pleased to say that these elements are contained and represented Velazquez's bill H.R. 3011. As tragic as that is for us as individual Americans failure to pass immediately such legislation predicts an even larger tragedy. If we have learned nothing else in the past few weeks, the country has, we think, come to understand the way in which the entire economy depends upon air transportation and upon the travel and tourism sector generally. The impairment of the air transportation segment sector threatens to move swiftly from a ripple effect to a tidal wave of economic destruction sweeping across this entire country.

If the public losses the ability to use the travel agency distribution system to access the air transportation system and the rest of this travel and tourism enterprise, the consequences will be certain and unavoidable. National economic recovery will be impaired for years to come by our failure to restore the confidence of the public in not only the security of travel, but also their confidence in the experience of obtaining and using travel services. Travel agencies, almost all of whom are very small business, arrange 75 percent of air travel bought by Americans today.

The public uses travel agencies because they provide what the pubic needs in the way of information counseling and services. There is no practical or economic way the airlines or other travel sectors can duplicate this service. During the heartbreaking days immediately following September 11 attacks, American travel agencies were there for their clients, as they were there for others as well. Across the country travel agents were in their offices trying to help many thousands of people stranded by the nationwide airport closure. Many of them provided free assistance to people who had bought their tickets on the Internet and had no one else to contact and no place to go for help.

Travel agents performed these services because they were the only people who could. And, at the same time, they watched their businesses collapse. Many agencies report gross earnings for the week, including September 11 of less than $50. It is a fact that this unprecedented situation there was no substitute for the travel agent for tens of thousands of people who needed our help. The services of professional travel agents with expertise in travel options are going to be crucial to bringing the public back to the airways. Consumers are going to want and need to talk to real people, preferably someone they know and trust with current knowledge of the system, the new rules and the requirements for achieving safe and fast travel.

National economic recovery can be delayed for a very long time if travel agencies are not there to connect and serve the customer and the airline. Given the magnitude of the short term losses and uncertainty of near-term recovery, we seek for a billion in no interest or low interest, non-collateralized loans to be made available to travel agencies immediately. These funds will help assure that irreplaceable travel agency service will not be cut off to the public when they need them the most.

Finally, I ask to thank the members of Congress who have listened to the travel agent community in their time of need. Your immediate actions will help us get back on our feet, and we'll help you get America moving and quickly. ASTA appreciates the opportunity to presents its views and remains at the Committee's disposal to assist you in any way.

PENCE: The Chair thanks Ms. Adams for a very moving presentation and appreciate the difficulty, personally, in traveling here from Maine at a time of real duress in your professional life, very valuable and we appreciate it very much.

We will move to our next witness and encourage some attention to the five-minute rule. I wasn't going to gavel Ms. Adams, but I'll gavel any one of you fellows. Bill Swift is the--and in the interest of fitting everyone in before we might have to go to vote. Bill Swift is the President of Business Travelers Services, headquartered in Atlanta, Georgia. His company provides products and services at Hartfield Atlanta International Airport, LaGuardia International, and JFK. Mr. Swift has a 20-year track record in airport concessions. It's obviously an area of the small business sector profoundly impacted during these days.

Prior to establishing his own business, he served in several senior positions with Dobbs Pascal Midfield Corporation with management responsibility for 105 concessions of Atlanta. He's testifying today on behalf of Airport Minority Advisory Council, the only trade association in the country that focuses specifically on airport small business matters, and he's vice chairman of that organization currently. And William Swift is recognized for five minutes.

SWIFT: Thank you. Good morning, Chairman Pence, Congresswoman Christensen and Linda Moore, chair of AMAC. I am a business owner, the CEO and President of Business Travelers Services. I have been involved with the airport industry for nearly 25 years, first as the director of purchasing for the City of Atlantic under Mayor Menard Jackson. Now, as the concessionaire with operations at Hartfield Atlantic International Airport, LaGuardia International Airport, JFK International Airport, Raleigh Durham, Cleveland Hopkins, the Houston airports and Jacksonville, along with Augusta. I'm also testifying today as the first vice chair of the Airport Minority Council, known as AMAC. AMAC is the only organization of our country that has dedicated its sole mission for the last 13 years to the ensuring that minority, women-owned and disadvantage businesses, business enterprises, participate in the economic opportunities at our nation's airports.

Our members operate food, beverage, services, retail concession, provides professional services and performs infrastructure develop contracts at U.S. airports nationwide. I hope that I can impress upon you the urgency of the need for Congressional action to help these businesses sustain during this period of crisis.

For the record, Mr. Chairman, AMAC is supportive of H.R. 3011, the bill introduced last week by your colleague, Congresswoman Lydia Velazques, the Ranking Member of the Full Small Business Committee. We are very supportive of its purpose to help stabilize effected firms and appreciate the considering introducing legislation address this issue. We're also aware that similar legislation has been introduced in the Senate separately by Senators Kerry and Bond, the Chairman and Ranking Member respectively of the Senate Small Business Committee.

We are most grateful for the recognition of the crisis affecting small firms, however, I stress that this is an emergency situation, which requires prompt congressional action. Today, hundreds of small disadvantaged women and minority-owned businesses are in jeopardy of closing their doors as a consequence of sharply reduced sales. This is particularly the case for airport DBE's and other airport commercial tenants. The economic peril is a direct product of the federal shutdown of airports for a time, as well as the impact of new increased security measures, other procedures, not to mention the overhead costs associated with existing leases and contract arrangements and debt service.

We do not question the necessity of the government's action. Indeed, to the contrary, AMAC members understand and strongly support the measures to enhance safety and confidence of the traveling public. However, it is very important for Congress to understand and acknowledge the effects of the federal government's action on airport small businesses. For this reason airport DBE's and commercial tenants merit federal assistance in the same way as airlines and airports.

AMAC members and airport commercial tenants generally are an integral part of aviation and airport industry. Collectively, these businesses are a major economic generator for airports, for the communities in which they operate or located. They provide employment, pay taxes, perform services and contribute to the efficient operation of airports and provide vital services to traveling public.

AMAC is sympathetic and supportive of the airlines and airports, but not at the expense or on the backs of small businesses with locked in high rent guarantees. Thus, in AMAC's view the survival of airport small businesses' business in particular, DBE participation airport concessions contracts should be a priority concern of Congress.

As you heard, airport operators are seeking federal financial assistance to help them weather the current crisis and to help defray additional security operating costs. AMAC asks that you and other members of House Small Business Committee insist that any legislation providing relief for airports also include specific provisions for financial assistance to airport, small and disadvantaged businesses, and other commercial tenants. We believe that as a matter of sound public policy and equity that a portion of the financial benefits accorded airports, should be extended to airport DBE's and other airport commercial tenants whether the assistance is provided through additional funds from airport and airways trust fund, to increased flexibility in the use of passenger facility charge, revenues or through changes in federal tax laws.

As a consideration receiving additional federal funding or tax benefit in airport operator must be required to implement a plan for assisting airport DBE's and commercial tenants. My written testimony offers several proposals and I will not state that.

Mr. Chairman, I have owned and operated and managed airport concessions, including golf shops, newsstands, sports stores, restaurants, bookstores, business services, for more than 20 years. My current business, Business Travelers, provides internet access, work stations ATM's, prepaid phone cards, concierge service to airport users. I tell you from my personal knowledge and from talking to other business owners that the types of actions assistance noted about would be very helpful.

SWIFT: For example, three or six months of rent abatement will provide another infusion of capital to help these businesses to cover their costs. Some of these airports have attempted to address this issue, but they have not taken a large enough step.

Finally, Mr. Chairman, the general public has not regained its confidence with air travel, as a result, our revenues are at an all time low and tend to continue now that the war on terrorism has begun. Our lease agreements are fixed rents and are based upon projected revenue streams, clearly the current state of air travel, new security requirements, decreased passenger traffic, have made it nearly impossible for small or disadvantaged businesses to meet their fixed expenses. Therefore, AMAC is asking that Congress enact legislation that will provide immediate relief for airport DBE's and other commercial tenants.

To the House Small Business Committee that has jurisdiction over SBA programs that can provide small and some emergency help and we ask you to act urgently on legislation that makes airport businesses eligible for SBA economic disaster assistance.

Thank you, sir.

PENCE: Thank you, Mr. Swift, and without objection the Chair will entire your entire statement as you helpfully abbreviated parts into the record of the testimony today.

SWIFT: Thank you.

PENCE: Hector Torres is our next witness. He brings to this panel 32 years of experience in the hospitality industry in hotel development, and has been very busy about promoting Washington D.C. tourism, which apart from my commute into work, is something I certainly appreciate. He is currently Vice President of sales and marketing of Capital Hotels in Washington D.C. And I might add in addition to his business activities he is also well known in this area as Chairman of Board of a group known as Identity, which is an inner city youth organization focusing on the Latino community and it's a honor to have you here, Mr. Torres, and you're recognized for five minutes.

TORRES: Thank you very much and good afternoon Chairman Pence, distinguished members of the Committee. I am actually very honored to have the opportunity to speak on behalf of 31 small independent hotels out of 83 member hotels of the Hotel Association of Washington D.C. My name, as earlier stated, is Hector Torres and I'm Vice President of Capital Hotels, Washington D.C. We own and mange two hotels, the Governor's House Hotel and the St. Gregory, both located in downtown Washington D.C., both members, of course, of the Hotel Association.

Like the rest of the nation, we have experienced in D.C. a major negative economic impact in the wake of the tragic events of September 11. The impact has heightened due to the fact of the closing of Reagan National Airport, extended closing of the airport, the front door, in fact, to our nation's capital. Because of the worldwide media to focus on our national capital, until the hospitality and business economy of the nation's capital is revived, perception to the world will be that our nation's vital economy remains cripples.

As the nation's capital, Washington D.C. was the symbolic leader of the nation's return to normalcy, revitalizing Washington D.C. must be the first step in a nationwide recovery. Within the Washington metropolitan region, the rest of the hospitality industry is the largest private sector employer, comprising in excess of 3,000 businesses and 260,000 employees. The Washington D.C. hospitality industry does not recover, your favorite local restaurant and purveyors of food and other essential supplies to Congress, itself, will be at jeopardy, negatively impacted, if not completely out of business.

If you stopped at the St. Gregory these past weeks, you see very few visitors, an empty lobby, and in the past few weeks we have had to lay off tremendous amounts of people. This is--equally, if you should go around the corner to Red Sage Restaurant, for example, they have had to curtail services, their time of opening and have also had to experience tremendous layoffs. This is just merely a snapshot of what actually is pretty well commonplace in our nation's capital and in the region. The trickle down effect is, in fact, incalculable.

Reality, as Congresswoman Helen Holmes Norton has very dearly expressed in the days after the opening of the Reagan National Airport, it was no look at Reagan National's opening as a victory lap. It simply is the beginning. We need to resume full service in order to rid the perception that nationwide air travel is unsafe and to return tourists to our city and nationally.

The hospitality industry normally supports 260,000 individuals and their families; it pumps nearly $10 billion annually into our economy. The hospitality industry is losing over $10 million a day in our region. The next 100 days we anticipate the loss of nearly $1 billion. Small businesses actually comprise of 90 percent of this business supporting tourism and are either related to tourism or dependent on tourism and do not have the capitalization or cash reserves to survive the turndown. Naturally, D.C. hotels normally enjoy 80 percent occupancy this time of year; we are currently running at approximately 40 percent.

Metro restaurants have experienced massive layoffs and a dramatic downturn in revenues may seize more than 50 percent revenue losses. Small hotels occupancy has also dropped significantly, particularly as they cannot count on national advertising campaigns to support their losses in the form of advertising or market support, losses in some cases amount to up to 50 percent of occupancy.

On one group alone, the World Bank, our hotel, the St. Gregory, lost $100,000 in one week's time. It is, according to Wold Bank IMF, there were 25 hotels participating directly or indirectly in these events. So you can imagine, by calculating in our small hotel $100,000 loss in one week's time actually represented one-fifth of our total income for that given month.

The human toll falls on the individuals losing jobs as well, those who earn salaries to support families and to contribute to the economy of our region. Of the 10,500 and counting jobs loss, many of them are Hispanics, blacks of minority decent, because they have actually their sense of basically dignity because they are now going back to a welfare type situation and they don't any money or sources to be able to fund even an insurance payment.

D.C. currently has the D.C. tourism Incorporation; Mayor Williams have committed $1 million to implement marketing and advertising, public relations, promotional activities, and reestablishing Washington as a premiere convention and visitor destination. The City and Washington Tourism Corporation are collaborating with 29 businesses in the area, as well to bring forth a campaign to attract business into our nation.

We ask that Congress please help us in the process of helping the small businesses in support of grants and/or low interest loans for be able to support such unemployment benefits as COBRA, as well as to urge other vehicles within the government to support our plight.

First, my document gives you some other strategic ideas that we could implement. And I thank you very much on behalf of the Hotel Association for your kind attention.

PENCE: The Chair thanks Mr. Torres and without objection will see to it that your entire presentation is entered into the record. I'm going to say David Cheseboro.

CHESEBORO: Cheseboro.

PENCE: Cheseboro, thank you, founded Daytona Orlando Transit Service in 1982 beginning with three employees and three vehicles, two decades later the company has grown to 42 employees and 14 vehicles, that range from local shuttles to interstate motor coaches and has expanded to offer a wide range of services to include tour and charter development, originating at least out of the Daytona Beach Florida area. The mainstay of DOTS has always been the Orlando International Airport Shuttle and the company currently offers employees comprehensive benefits package, which includes healthcare, dental, profit sharing and Davis Cheseboro currently serves, of course, as President and owner of that company and brings a very important small business perspective to the current downturn in our travel economy and is recognized for five minutes for that reason.

CHESEBORO: Good afternoon, Mr. Chairman, and members of the Committee. My name is Dave Cheseboro and I'm President and the founder of DOTS motor coaches of Daytona Beach, Florida. I am pleased to be here and represent 3,400 members of the American Bus Association.

To begin, I'd first like to thank you, Mr. Chairman, for your leadership in convening this hearing and appreciate the opportunity to testify on this urgent matter. ABA members are equally diverse ranging from Greyhound bus lines, which provides service to 2,500 destinations, to my company, which provides services to and from the Orlando International Airport. However, most of the ABA member companies are small businessmen and women alike. To give you an appreciation of what we do I'd like to take a minute to describe my company and the service we provide, from there I will try to give the Committee an appreciation of what the September 11 attacks on New York City and the Pentagon and the constant lack of travelers has done to my business as well as the motor coach businesses all over the country.

I founded DOTS in 1982, beginning with three employees and three vehicles, nearly 20 years later the company has grown to 42 employees, including 14 vehicles. Our services range from local shows to interstate trips on motor coaches. Like all the private commercial bus industry, I received no federal funding to support my company's operational structure.

In addition to my shuttle service to and from the Orlando International Airport, I provide shuttle and tour service throughout the United States, including trips to Biloxi Mississippi and Branson, Missouri. While these services have also suffered during the past month, it is the effect of the September 11 attacks on my airport shuttle services that forms the core of my testimony today.

The mainstay of DOTS has always been the airport shuttle. It is approximately 75 to 80 percent of my business. Routes grew steadily from three round trips a day to its current operating 15 hourly round trips daily, to and from the Volusia county area to the Orlando Airport. To acquaint the Committee with my post September 11 troubles, I'd like to walk you through my operations.

Normally at this time of the year I can count on shuttle gross receipts of approximately 78,000 per month, equal to 2,600 per day based on a $25 one-way ticket to or from the airport. Since the attack, DOTS revenue has been down some $21,000. Against this I have to maintain the vehicles and make monthly payments on most of them. Since this is a great deal of revenue for business, which grosses 1.7 million a year, this figure includes shuttle, charter, and tour business.

Recently I sent a memorandum to my employees asked that they voluntarily take time off each week so that I could keep all part-time drives on the payroll and a copy of that is attached. The affect of the attack is DOTS is even worse than it sounds. Business was down from December to July, and then in August I had seen an increase in business I thought would be an indicator of a good autumn and holiday season. Of course, the events of September 11 eliminated that possibility.

ABA members from California, Montana, Missouri, Florida, North Carolina, Louisiana told ABA of one-week losses ranging from 20,000 to into the millions of dollars and also cancellations rates of 30 to 80 percent. The cancellation includes trips planned for spring of 2002.

VecTour, of Pennsylvania, the largest privately owned ground transportation company in North America has a business that is more than 50 percent airport related. It experienced an immediate drop of business of about 40 percent. This loss will cost the company almost 7 million in cash between now and the end of the winter.

This series of cancellation points out even greater problems. As I indicated, this time of the year is high season for many ABA operators engaged in charter and tour services, as well as those of us that serve airports close to major city, United States, tourist attractions. Any loss of cash flow, especially during peak times effects the day-to-day operations, as well as the operations into the future.

Without these revenues, many motor coach operators face a bleak winter and maybe the prospect of shutting their doors for good. The question for the Committee and Congress is to decide how to ease the affects of the attacks on this segment of the transportation industry.

In sum, the motor coach industry seeks financial assistance of any sort until the spring and more normal transportation and travel patterns reassert themselves. One recovery suggestion within the purvey of this Committee is the expansion of access to small business economic injury disaster loans and loan guarantees.

Under SBA regulations, businesses located within the declared disaster are eligible for financial assistance from this program. The nature of the motor coach business is that our business is located wherever our customers travel. The industry must have access to these loans to foster recovery and loan guarantees to provide motivation for equipment lenders to work with bus owners to meet scheduled payments.

No one doubts the American people will return to the skies and travel again, it's just matter of time. However, until the day businesses affected by the attacks on us will have to have financial help in order to be in service when that day comes. We are looking to members of the Congress to aid the bus industry and, indeed, all of us in attaining this goal.

CHESEBORO: Once again, thank you for the opportunity to meet with you today, and I would be pleased to answer any questions you may have.

PENCE: Thank you, Mr. Cheseboro. And we will break a bit with convention and the gentlelady from the Virgin Islands and I will actually alternate questions to individual panelists and, as we believe will probably eminently be called for a vote here after quarter after and we want to--I want to make sure that my colleague and I both have opportunities to answer questions.

So, with that, the Chair would direct the first question to Ms. Adams. You're on the frontline of the travel industry as a travel agent. My question to you would be to rate in some way the severity of the current downturn, for instance, did your customers cancel short-term plans to travel or have they canceled their Thanksgiving and their Christmas travel plans. Can you give this Committee some sense of the duration of the impact on our travel industry from your perspective?

ADAMS: I would be glad to. And I would dare say I'm a prototype for all travel agencies across the nation. After September 11 it was immediate cancellations, immediate being defined in the next say 60 days, people just froze up, wanted refunds, canceled packages and tours. After about two weeks we started receiving cancellations on some of our groups for March and April into the Caribbean, we're in the Northeast; they want to go there.

Interestingly enough we held our breath with the advancement of our nation's response on Sunday and we indeed received the second wave of cancellations well into the future Tuesday and Wednesday of this week. So, the answer to your question, Mr. Pence, would be yes on all the above. It's just whatever groups or individual leisure travel we had has disappeared, corporate seems to also be at a standstill.

PENCE: Going forward, can you give the Chair an estimate of the number of months that you've seen plans canceled?

ADAMS: We can't see that far, that's how far.

PENCE: Wow.

ADAMS: It starts in December and I will tell you that our season goes well after Easter, June, July, we have a group in July that was cruising that have to make some long-term commitments that was under deposit with over 53 passengers, fairly reasonably large sale for us, and it fell apart immediately with 50 percent. It came to a point of having so few we had to pull the plug on the whole thing.

PENCE: Wow. The gentlelady for the Virgin Islands is recognized.

CHRISTENSEN: Thank you, Mr. Chairman. Before I ask a question, I just wanted to say how great it is to have such a diverse panel in front of us and have the District of Columbia represented as well. It's not often that that happens at our Committee hearings.

Let's see where would I start? I'm going to ask Ms. Adams a question as well, although I wanted to say to Mr. Swift that this afternoon the Minority Business Task Force of the CBC will be meeting to take up specifically some of the issues that you raised. And we raised them with the SBA Administrator yesterday as well and will continue to follow up with those issues. We hadn't focused in on airport businesses, but on minority and disadvantaged and women-owned businesses.

Ms. Adams, would you explain to the Committee why had the access to a loan program that's based on ability to pay rather than collateral is so important?

ADAMS: Currently, as most small businesses service oriented, we have no hard assets in order to even obtain letters of credit, we need to collateralize our own personal property. We have nothing left to collateralize, and quite candidly, all of those loans, for operational expenses right now are maxed out. So, the ability to repay would be vital to the formula for us. There is nothing left we can give you. We don't have a thing.

PENCE: The next question would be for Mr. Swift. During your testimony, that I thought was very good and very informative, by the way, you made reference to the fact that lease agreements for most of the people that you're here representing are established on the base of fixed rent. Can you give the Subcommittee a number of the concessionaires that may be in jeopardy of default on their agreements due to reduced sales, give me a percentage of the industry, because I find that--I had a different expectation about how those agreements might have been drafted based on overall sales and percentages, but if it's a fixed rent agreement, it sounds to me like we could be in very serious trouble, a lot of these business concessionaires.

SWIFT: Absolutely. Let me address it a couple of ways. Number one, probably 90 percent of all contracts are with a fixed rent, but not only on a fixed rent, but a guaranteed rent against a percentage, whichever is higher. So, there are locked in and these contracts are often five years or longer. So, as in the case of my company we just renewed our contract, at Hartfield for another five years with a CPI increase based on the average annual growth of the traffic at about five or six percent. To take a hit of anywhere from 30 to 40 percent in traffic makes it quite difficult, excluding the fact that the meter greeters are not going to the airport, they're not know part of the mix of sales.

So, in that regard, most operators are under fixed rents. What used to be an average of 15 to 20 percent of your gross revenue was towards your rent, now for some of us it represents anywhere from 40 to 70 percent of your gross revenue because of the locked in relationship to fixed rent.

PENCE: The gentlelady from the Virgin Islands--forgive me but I was just very--I'm stunned by that. Maybe one quick follow up if I could. Is there any sense in your industry, your business or elsewhere around the country that companies that own arena and operate facilities are working with vendors with these fixed rent arrangements already, has it been happening in the last 31 days or is the expectation there that they'll just simply grind down?

SWIFT: I can tell you this; unfortunately, most of the relationships are with local government entities and the speed in which they're able to move is 90 to 180 days.

PENCE: OK.

SWIFT: We need a fix right now.

PENCE: OK.

SWIFT: I'll also say that out of 400-plus airports, we know of two airports, VFW and the Reagan National where they have taken immediate steps to say we're going to adjust the rent now rather than waiting another six months.

PENCE: Two airports?

SWIFT: Correct.

PENCE: OK. Thank you.

CHRISTENSEN: Mr. Torres, I'm also a member of the travel and tourism caucus steering Committee and we had some meetings with different groups, including the travel industry of America who propose a tax credit for travel within the United States and the 100 percent meal deduction. We had--let me see if I pronounce it, e-ricki (ph) here--.

TORRES: Right.

CHRISTENSEN: --Testifying yesterday.

TORRES: Right.

CHRISTENSEN: And Ms. Ricki from that restaurant, and some other proposals. Would those help the Washington D.C.?

TORRES: Absolutely. But, everything helps to be honest with you, anything that is proactive that will support our cause. However, one of the key things is for Congress to help us the process of restoring full use of Reagan national Airport. As long as that airport is operating on a limited basis, this city will appear to the world as a crippled city. That is a message that we can't afford to continue sending out. It is dangerous. There's no way that anyone will feel comfortable if the nation's capital itself is inaccessible.

CHRISTENSEN: I got that message very clear.

PENCE: My next question would also be for Mr. Torres, could you explain to the benefit of the Subcommittee the general service Administration's premier lodging program and how specifically that would help small hotels like the one you operate?

TORRES: Well, the Premier Lodging Program, as you know, is a GSA program that actually evaluates and supports some marketing efforts, hotels that are offering lodging to the government traveler. And, in fact, the response to the program has been pretty well due to Washington hotels in over six months. And it was suppose to have been given to us of the decision this October. Unfortunately, that is delayed and we delayed almost to the point that we don't know exactly when.

In fact, the way that it will help is that it will support in a great way the marketing efforts of Washington D.C. In addition to that, it will also give us, hopefully, an increase in rate. Washington D.C. has experienced rate increases as far as the federal per diem last year was 1 percent, and I have to say a paltry 1 percent, as against the rest of the nation receiving increases of 25 percent, such as cities like Boston that received up to 50 percent increase in the rate.

It helps our smaller hotels because generally the small hotels are the ones that open arm--welcome with open arms the government traveler. It helps with the City entirely because it makes the government traveler more viable as a real source of business and certainly we're competing, everybody competes effectively on that business, because generally small hotels can't handle the large conventions and, consequently, work with the government very much in accommodating their traveling guests.

PENCE: Ms. Christian-Christensen?

CHRISTENSEN: Thank you. This issue of the disadvantage businesses, 8a businesses, and so forth is one that is of great concern to the Subcommittee, and, of course to the Congressional Black Caucus. The businesses that you are describing are they certified disadvantaged businesses, are any of them 8A?

SWIFT: On the construction side some of them are probably 8A, but on the concession side of the coin that is generally not required of them to be 8A, but they are all certified as DBD.

CHRISTENSEN: Just in a general level, have you been experiencing some of the difficulties that have always been coming to the Committee with getting contracts, getting concessions and so forth and we're looking at the ataman being argued again at the end of this month. Did you want to make some comments just generally on the state of disadvantaged and minority businesses?

SWIFT: Certainly, considering the fact that the focus of AMAC is in support of that level of participation for women and disadvantaged businesses, we see no immediate future for AMAC to go away. In fact, we think our job and our responsibility has been strengthen because of the need is greater. Unfortunately, far too many airports have taken the opportunity not to make this part of the fabric of their institution so there's some battles that we have to deal with. If it was comfortable and everyone went with the idea that it is good business to do business with everyone in our community, there would be no need for firm or companies or organizations such as AMAC.

CHRISTENSEN: All right. I hope that as we have to work towards rebuilding the entire economy in light of what happened that we can do it in such a way that strengthens it across the board for all Americans. I think that's a real challenge for us. But, I think it's something that we really need to pay attention to in this particular time when there maybe a window, some opportunity to strengthen our businesses.

SWIFT: If I may add, that is one of the elements of this crisis period. It has underscored that fact that we are all Americans. No one was left out of the crisis.

CHRISTENSEN: Thank you. I don't have any further questions, Mr. Chairman, at this time.

PENCE: Thank you. I have one quick question and then I'll recognize the gentlelady for any closing remarks she might have and we'll wrap up this panel and this hearing.

Mr. Cheseboro, I had a question there just from the standpoint of common sense, there was talk immediately after September the 11th about an increase usership of busses that traffic had possibly increased for Greyhound services, not necessary for airport shuttles and the like, which would be impacted. Some of your testimony seems to fly in the face of that as you're here not only on your own behalf, but on the behalf of the industry as a whole. What has been, taking into account, the impact on shuttle services like yours and others' impact on the events of September 11 to the busing industry in your judgment, positive, negative or break even.

CHESEBORO: Well, like I say, I have hard time answering for Greyhound, because the ABA be more representative of that than I would.

PENCE: Right.

CHESEBORO: As a whole, some support companies, as I noticed when I flew into Dulles yesterday the Super shuttle is reaping the profits and a lot of the cab companies, coming this way, obviously with Reagan being closed. Myself, it's impacted me and the companies in the Orlando, the general central Florida area, I can speak on behalf of them and in that retrospect with the travel agent industry considered also, that revenue is down on everybody's behalf in that area.

Now, some areas of the country, like I say, some sections of the busing industry probably are profiting from it.

PENCE: Very good, any closing remarks from my colleague?

CHRISTENSEN: You know I did have one other, Mr. Chairman, to Ms. Adams. After the airline bailout bill, did the airlines offer to return to their old ticket reimbursement for travel agents? You know, that I know you're very much aware with the Virgin Islands with that and as it affects all travel agencies, but particularly ours.

ADAMS: Unfortunately, they didn't offer us anything if that's what you're asking. We were already hurting from an August 20 wound when they cut our commissions by 20 percent. So going into September 11 we were in bad shape, I'm sorry by 60 percent. If you can imagine being a small business owner and getting a fax at four in the afternoon on a Thursday to say tomorrow your income for the airline tickets is cut by 60 percent. And then that was August 20th, we were limping, we were hurting, but we have tenacity with small business people, we were scraping by and then we got clobbered on September 11. And, no, we've had no communication of such from the airlines.

CHRISTENSEN: Well, just in closing, as I was saying during the break, the ripple effects from September 11 continue to get wider and wider and its clear from yesterday's testimony and today's that, you know, we need to approach with some sense of urgency, especially with small businesses, because they don't have the ability to hold on and hang on much longer. So, you know, we appreciate your coming, we appreciate your testimony. And remain committed to addressing the issues and making sure that our small businesses, small businesses of all Americans of this country get through this period and prosper in the future.

PENCE: I, too, want to thank the panel, both panels for really outstanding presentation and also want to express appreciation to my colleague and a good friend, the gentlelady from the Virgin Islands for ongoing commitment to the tourism industry, as evidenced by a colossal commitment of her time today in this Subcommittee.

I also appreciate very much my colleague's observation of the diversity represented on this panel; I found Mr. Swift's comments very eloquent and very moving. I'd say that one of the flowers growing out of the ashes of September the 11th is the realization that we as Americans are all in this together. And the unity that we've experienced on Capital Hill, I think, is simply an extension of the unity that we sense around the country.

I want to hope, as many of you and people you represent and some of those testifying here today, are going through difficult times, I hope that you'll leave Washington encouraged by the interest that you've seen evidenced here and that I'm sure you'll hear as you meet with Representatives throughout the day or however long you're in the nation's capital. I also want to leave you with the knowledge that I hope this has been encouraging to you as it has been informative to this Subcommittee. You have, by your testimony today, enabled us all on this Subcommittee to be much more aggressive, much more informed in our advocacy of the interest of the small business community in the wake of September 11. And, for that, I am personally grateful and am grateful on behalf of the Subcommittee.

With that, we're in a very timely way adjourned.

END

NOTES:
???? - Indicates Speaker Unknown
    -- - Indicates could not make out what was being said. off mike - Indicates could not make out what was being said.

PERSON:  LARRY ED COMBEST (57%); LARRY COMBEST (57%); SUE KELLY (57%); TODD AKIN (56%); SAM GRAVES (56%); ROSCOE G BARTLETT (56%); PAT TOOMEY (55%); ROBERT BRADY (55%); CHARLES GONZALEZ (54%); DAVID PHELPS (54%); BILL PASCRELL (54%); JAMES LANGEVIN (53%); 

LOAD-DATE: October 16, 2001