FNGATSWG-Initial Observations

1
FNGATSWG-Initial Observations

• Financing the Next Generation
• Air Transportation System Working Group
  (FNGATSWG)
• July 27, 2005

2
Financing the Next Generation Air Transportation
System Working Group (FNGATSWG) approach

• Establish in cooperation with the JPDO and other
  elements
• a baseline 2006-2025 cost estimate for
  developing, implementing, and operating the
  planned NAS if the NGATS is not implemented.
• a corresponding 2006-2025 cost estimate for
  developing, implementing and operating the NAS
  converting to NGATS in 2010.
• Identify the options for funding the resulting
  system cost through user fees or user taxes
  supplemented by a general fund contribution.
• Develop a set of criteria for assessing these
  options.
• Determine if a financing approach such as bonding
  based on a stream of user or other fees is
  needed if so identify options for doing so.
• Consider approaches to implementing the NGATS
  that the industry and Congress would support.
• We are looking for opportunities to reduce costs
  through advanced technologies and techniques or
  outsourcing, but we are not considering issues
  such as labor contracts, privatization or major
  structural changes in the FAA. 

3
FNGATSWG-Initial Observations (1)The group has
not yet reached a conclusion on any aspect of its
work.  Therefore, the observations below are not
final. They will change as we continue our
work. 

• Required funding levels are estimated at about
  15 Billion per year in 2005 dollars, considering
  RD, FE, Operations, and AIP funding in either
  NAS or NGATS scenarios.  The FAA operations costs
  dominates these figures.
• At present, there are no definitive official
  cost projections through 2025 for either the NAS
  or NGATS option. The working group will come up
  with a reasonable best estimate based on
  discussions with all knowledgeable parties.

 
4
FNGATSWG-Initial Observations (2) The group has
not yet reached a conclusion on any aspect of its
work.  Therefore, the observations below are not
final. They will change as we continue our work.

• The current FAA revenue structure will not
  generate enough income to support either the
  current NAS or the future NGATS between FY2006
  through FY2025. One factor driving the
  shortfall is the likely continued ticket price
  decline which reduces ticket tax revenue. The
  shortfall will be greater if the OMB proposed
  reduction in the General Fund contribution takes
  effect. On the other hand, there is the
  potential for substantial cost reductions in FAA
  operations. Because both cost and revenue
  projections are uncertain, the working group is
  considering revenue mechanisms which are flexible
  enough to be adjusted to create income change
  without structural modification.
• Cost and revenue growth are out of sync and will
  forever need to be adjusted to maintain balance
  and stability with the current approach.

5
FNGATSWG-Initial Observations (3) The group has
not yet reached a conclusion on any aspect of its
work.  Therefore, the observations below are not
final. They will change as we continue our work.

• The current funding approach can be made to work
  by adjusting the rates and proportions among the
  four major income sources.
• The General Fund Contribution Currently about
  22
• Reflects the contribution made by the aviation
  infrastructure to the nation as a whole
• The Fuel Tax Currently about ___
• Roughly proportional to the cost of service
  demand (proportional to operations)
• The Ticket Tax Currently about ___
• Roughly proportional to the passenger
  enplanements times ticket prices
• The Waybill Tax-Currently about ___
• Proportional to the value of the way
  bill
• Some users would like a reassessment of the
  fairness of the distribution of costs across the
  industry and the costs apportioned to newer
  players vs. the legacy elements. Additionally,
  FAA funding stability would be enhanced if the
  fee structure more closely coupled revenue growth
  with cost growth.

6
FNGATSWG-Initial Observations (4) The group has
not yet reached a conclusion on any aspect of its
work.  Therefore, the observations below are not
final. They will change as we continue our work.

• The costs of current NAS system operation with
  costs of development and implementation of
  planned improvements are as much or more than
  operating the the NAS through 2010 and then
  transitioning to NGATS through 2025. The current
  NAS improvements will provide limited, but
  insufficient increases in capacity to meet the
  projected 2025 demand. The NGATS provides the
  needed capacity while it reduces the operations
  cost.
• It is probably less costly to implement NGATS
  than not implement NGATS. Technology insertions
  that lead to a reduction of operations cost over
  time have an exceptional ROI and may lead to
  reduced budget requirements in the out years.
  Many of these same technologies will also
  contribute significantly to the needed capacity
  increase.

7
FNGATSWG-Initial Observations (5) The group has
not yet reached a conclusion on any aspect of its
work.  Therefore, the observations below are not
final. They will change as we continue our
work.  

• Near term cost control of the FAA ATM operations
  cost is being accomplished by the FAA ATO
  organization through a broad review of
  appropriate industrial actions and limited
  insertion of technology. Associated with these
  activities is an improved accounting system that
  supports identification of cost control
  opportunities and effectiveness measurement of
  actions taken.
• In the longer term, the NASA aeronautics RD
  program is the principle source of technologies
  needed to enable future aviation system capacity
  and to control FAA operations cost. Continued
  funding of this NASA program (funded from the
  General Fund and not part of the FAA budget) is
  required if the Next Generation ATS is to become
  a reality.

8
FNGATSWG-Initial Observations (6) The group has
not yet reached a conclusion on any aspect of its
work.  Therefore, the observations below are not
final. They will change as we continue our work.

• The level of General Fund support is critical to
  the trust fund approach.  At present it appears
  that a 25 contribution may be appropriate.
• Can any percentage of the General Fund
  contribution be considered stable and sustainable
  from year to year given changing national
  priorities?

9
FNGATSWG-Initial Observations (7) The group has
not yet reached a conclusion on any aspect of its
work.  Therefore, the observations below are not
final. They will change as we continue our work.

• Development and implementation of the NGATS is a
  fifteen-year activity with a relatively constant
  level of required funding.
• There is probably no need for financing
  scenarios including approaches such as revenue
  bonds.   However, we with the JPDO are continue
  to look for approaches to implement the NGATS
  earlier than now planned. These approaches may
  require some up front financing.

10
Continuing Work of FNGATSWG

• Development of alternate funding scenarios
• Review of program management alternatives that
  would likely improve the acceptability of a
  funding approach to the agency, industry and
  Congress.
• Continuing review of projected costs and
  opportunities for reducing future costs.
• Continue to solicit input for all of the industry
  stakeholders.