Remarks of Carol B. Hallett, President and CEO, Air Transport Association, to the California Chamber of Commerce, Sacramento, California, April 16, 2002

Thank you, Tom, for that kind introduction. I am always delighted to come home to California. While Sacramento is not my hometown, it has played a very important role in my life. And, I’m delighted to see a number of familiar faces here today.

One face is missing, however, and it may surprise you to know that I wish he were here. I’m referring to my old pal, Willie Brown. There was a time when Willie and I sat on opposite sides of the fence—when we were serving together in the state assembly. But, he is one Mayor who understands the importance of a modern airport and building new runways. So, it should not surprise you that I’m here to talk about airports, air travel and the airline industry in general.

After all, more people fly into and out of California than any other state—75 million passengers annually—greater than the total passenger volume between North America and both Europe and Asia. Of the nation’s fifty busiest airports, eight are in California. With the possible exceptions of Hawaii and Alaska, no state is more dependent on intra-state air travel than California, and only Texas has more airline employees than California’s 75,000. I only wish that officials of every city with a commercial airport, supported by business and industry, would work as hard to improve their end of the air travel system as Mayor Brown has done.

Well, it was just over seven months ago—September 11—that the terrorist attacks on the World Trade Center and the Pentagon changed our way of life radically and for the foreseeable future. The industry most harmed by those attacks was the air transport industry—and the passenger airlines in particular. As I'm sure you know, we're still recovering from that disaster.

At the same time, we're doing everything possible to make air travel easy and pleasant again. New, more stringent security measures are in place. Airfares are low and there are travel bargains galore. Flight cancellations, delays, and customer complaints are all down; and average on-time performance is at its highest levels in years. However, many challenges remain.

For instance, the new Transportation Security Administration, or TSA, is examining what aviation security will look like run by the U.S. Government, not just regulated by the U.S. Government. It is not enough that air travel is the world’s safest form of transportation; it must also possess the highest levels of security, and the highest levels of convenience and efficiency.

The airlines, however, cannot do this alone. We continue to need the support of the federal government, as well as those governmental entities responsible for building, improving and controlling our airports.

Just as an aside, I should remind you that the airlines are unique in one major aspect. While government may build airports and runways, the airlines and our customers finance them. In 2000 alone, U.S. airlines paid over $16 billion in federal taxes, $1.5 billion in state taxes, and over $7 billion to airports.

That having been said, the safety and security of our airline passengers and crews—in the air and in the airports—remains our chief concern. Those who fly must be assured that flying today is safer than ever—and it is! But one thing we must do—at least for people who fly regularly—is to once again make it inviting to fly.

Something else on our agenda since long before last September is to enlarge, modernize and improve our commercial airports, to accommodate the increasing number of passengers that renewed safety, security and convenience will bring. By 2012, a billion passengers are expected to be flying annually—if flying is seen to be safe, secure and convenient.

Now, maintaining and improving airport infrastructure is government’s job—local, state and national—and unless airports and airport authorities keep up with growing demand, airline revenues will suffer and state and local tax revenues will stagnate, as fewer people patronize airports and airport-related businesses. And, even though those affected will not always greet the federal takeover of airport security screening with cheers, it was the proper course of action. In fact, it’s a position we have urged since 1973. And remember, until 9/11, we had never had to cope with suicide terrorists and these new types of security threats.

My friends, I don’t mean to sound melodramatic, but we must face the truth—the airlines are in the front lines in the war against terror. And we have no choice, except to meet the challenges that lie ahead. So let me begin with airport and air travel security.

Most of you have seen the reinforced cockpit doors on our airplanes. And when you’re served a meal, you’ve noticed you now get plastic knives? You know, it isn't easy to cut Southwest peanuts with a plastic knife!

Well, things are different in airports, too. You don’t show your picture I.D. just once. You show it two, three or more times. You can no longer carry a pocketknife, nail file, scissors or even knitting needles aboard. You can’t get through the security checkpoint without a ticket. And you—in fact everyone—may be subject to random checks and searches by the government's TSA.

Now I’m sure most of us understand the need for this kind of treatment—at least for the present. But I don’t have to tell you that the federal government’s security-screening apparatus has the potential to get awfully inconvenient and disruptive. We are already seeing people who used to fly on short trips now choosing other modes of transportation such as cars and trains. Or worse, they're not traveling at all!

In order to get those passengers back, we are strongly advocating the voluntary—and I stress voluntary—use of smart cards for regular fliers. Not only will these dramatically improve security, but they will also speed up boarding procedures. What we want is a process that does not require frequent travelers to spend two hours standing in long lines. Half an hour used to be enough—and Secretary Mineta's goal of 10 minutes can work, if the federal government will approve a voluntary traveler I.D. or “known passenger” program.

Such a program would involve the use of foolproof I.D. cards, utilizing available biometrics and anti-counterfeiting technologies. Persons carrying such cards would be screened separately, utilizing a less time-consuming level of security scrutiny. Yes, to get one of these cards you will be asked to provide personal and financial information—just as you are when getting a credit card—plus, a fingerprint or other biometric. But the choice would be up to the traveler—use a card or stand in line. We think this program would be a win-win all around—for security and consumers alike. I agree with retired American Airlines Chairman Bob Crandall that, “Intelligence about people—rather than inspection of things is… the key to both enhancing security and maximizing traveler convenience.”

There are other security measures being adopted or advocated as well—some of which we do not believe are particularly well thought through. Subjecting an 85-year-old grandmother to a more intrusive level of security screening than a 25-year-old foreign male who fits the intelligence profile of a terrorist doesn't make much sense when you think about it! We believe there are better ways to improve in-flight security using x-rays and bomb-sniffing dogs, for example—as well as a lawful passenger assessment, together with “data mining” for questionable patterns of behavior.

There are two other things I should point out. First, while flying is dramatically more secure today, the government's new system is just getting started. And first steps can always be improved upon. We’ve come a long way since the days of the Model T and the Ford Tri-motor and, by the same token, you can expect security measures to improve continuously.

The second point is this—airlines are in the business of safely transporting people and cargo. We are not law enforcement or intelligence agencies. Keep in mind, the government properly handles those functions. Aviation security is national security—and it must be treated and funded as such. Also, just as we do not turn to subgroups of taxpayers to support the national defense, so we should not expect those who fly to shoulder the full cost of protection from aviation terrorism.

Certainly, we want to work with government. But, ultimately, those measures needed to ensure the safety of air travelers must be provided by government, not by us.

Government—not the airlines and not the pilots—must decide whether or how pilots and crewmembers will be armed.

Government—not the airlines—must decide which flights will carry air marshals.

And government—not the airlines—must and will decide what security measures will be taken in the airports.

Let me say again, it is important that the private sector work with us—especially in those areas where together we can enhance the economy and livability of your communities. And that brings me to the economics of the airline industry.

As many cities have discovered, when people refuse to fly, not only airlines, but also the economy in general suffers. Hotels and restaurants lose business. Local ground transportation—taxis and limousines—hurt. And tax revenues fall. Let me give you some examples.

After 9/11, the airlines lost nearly 100,000 professionals—through layoffs, furloughs and voluntary attrition. We are calling these employees back as rapidly as possible, but clearly, in order to do so, travelers must return and the economic picture must improve.

It isn’t only the fear of terrorist attacks that affects airlines. In too many cities, airports are not kept up to date and do not provide enough runways to meet growing demand. And, taxes and fees also play a role. Currently, over 25 percent of the cost of a $200 domestic roundtrip ticket with one stopover is actually going to taxes and fees—up from about 15 percent just five years ago!

In this regard, I’m particularly pleased to tell you that California has taken steps to change its image as a “high tax” state for the airlines. But then, it’s starting from an incredibly high point.

Let me share what I consider a staggering number. We estimate that last year alone, the airlines paid more than $150 million in California property taxes on airports, aircraft and equipment. Furthermore, airlines paid another $100 million in jet-fuel taxes. That’s a quarter of a billion dollars spent on just two taxes in one state in a single year! And airlines pay those taxes whether we make or lose money—including last year when we lost over seven billion dollars!

Fortunately, your state government is starting to understand that a healthy commercial aviation system is the cornerstone of a healthy economy. Just last month, for instance, the state Board of Equalization voted unanimously to provide tax relief for airport property devalued by the post-9/11 shutdown of air travel; and exempt the taxation of grounded or stored planes in the Mojave Desert. Further, armed with the endorsement of the California Chamber—and I thank each of you—airline representatives will be working vigorously to drum up legislative support for a measure authored by Assemblywoman Pat Wiggins of Santa Rosa.

Pat’s bill—a new approach to others that have been introduced and failed in the past—would make the airline jet-fuel tax here more competitive with those imposed by your neighboring states. And that’s good. Better yet, California should emulate Texas, which has NO jet-fuel tax.

Well, ultimately, the airlines' ability to meet future demand will be challenged by four major factors:

• Significant delays from an insufficient air-traffic system;
• Rising labor costs;
• Increased federal and foreign ticket taxes and fees; and
• The "hassle factor" associated with more stringent security, which will likely have a disproportionate impact on short-haul travel.

That is why when you fly into or out of Reagan National, you must remain seated for the first 30 minutes after departure and the last half-hour before arrival. You don’t think that’s bad? Well, just make sure you take your “potty break” before you board and 40 minutes before you land. Otherwise, your flight will be landing at an airport named after Eisenhower's Secretary of State—Washington Dulles—rather than an airport named for our 40th President—Ronald Reagan Washington National!

Regardless, let me say in closing that we in the Air Transport Association are eager to work with business and industry in every state to build and maintain the world’s best air transport system; a system in which toy grenades and stupid bomb jokes don’t empty airports; and a system where passengers can fly the first and last 30 minutes of their flights relaxed and in comfort. I hope you’ll join us in beating the terrorists, who win if the airlines and the economy suffer the economic consequences of their evil acts.

Thank you very much.

Communications
4/29/2002 12:21:00 PM