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Marion C. Blakey
President and CEO
Aerospace Industries Association
Aircraft Builders Council Conference
Ritz-Carlton
Naples, Florida
Monday, September 24, 2012
11:30 am
Thank you David (David McClain, past President ABC) for
that wonderful introduction and good morning everyone. I’m
delighted to be here in Naples with so many champions and
leading innovators in our industry.
As President of the Aerospace Industries Association, I have
a pretty big “in box” of organizations and issues requiring my
attention. Three-hundred and eighty companies. The DOD and
national security agencies. The FAA. TSA. NASA. NOAA.
Export control reform. Industrial regulation. Acquisition. It’s a
big industry with big issues on our plate.
But at the core of our mission—going back to our
organization’s founding in 1919—is aviation. Every time I go into
my office I pass a framed replica of the patents filed by the Wright
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Brothers and Glen Curtiss over a hundred years ago for flying
machines. We’ve also got a framed stock certificate from the
Wright Brothers company. Orville Wright and Glen Curtiss were
founding members of the Manufacturer’s Aircraft Association, a
predecessor to AIA.
So I’m always mindful of our roots and ever hopeful about
the future of aviation, which I consider an adventure without end.
I might add incidentally, that those shares in the Wright
Company might have been fun to own, but I’m afraid they
wouldn’t have made their owners millionaires. As great as the
Wright Brothers were at inventing things, they didn’t have the Bill
Gates touch for making money.
Today we do have a prosperous industry, due in part to your
organization’s tremendous work. The Aircraft Builders Council
was founded 57 years ago, during the infancy of the passenger jet
age, and has become the world’s recognized leader in developing
insurance coverage to satisfy our industry’s dynamic needs.
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ABC insurers have always been at the cutting edge of
broadening different coverages and providing higher limits to
manufacturers. These include your aviation products liability
insurance coverage limits up to $1 billion. I can state with almost
complete assurance that every member company of AIA involved
with aviation has their insurance with someone sitting in this
audience. This coverage gives them the certainty they need to
develop the products and equipment that will enable our global
aviation system to grow, to prosper and to safely and efficiently
bring more people together in the years ahead.
It’s no stretch to say that the power of aviation to spur
commerce and to link people in ways previously impossible will
make our world a better and more harmonious one in the decades
to come.
I’m reminded of David Niven’s famous portrayal of Phileas
Fogg from the movie based on Jules Verne’s novel. Fogg, of
course, traveled around the world in 80 days. Today, in a modern
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aircraft, with refueling stops, that challenge could be met in less
than 60 hours.
Of course, the fundamental promise of our industry is not
only that it enables people to travel great distances in quick times,
but that it does so safely. We have come a long way in our
industry from the dawn of air transportation when there was one
fatal air accident for every million miles flown to roughly one for
every two billion person-miles flown today. While no means of
transportation is risk-free, aviation is now far and away the safest
mode of mass transportation.
I might add your insurance provides our companies the
certainty they need to make significant research and development
investments into further air safety improvements. We at AIA
continue to work closely with industry, the FAA, ICAO and our
counterparts on every continent to ensure that air transport remains
the safest and most efficient means of transporting people and
goods throughout the world. As safe as aviation has become, we
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also know we can get even better, and you at ABC are helping
enable this progress.
The title of my talk today is “Avoiding Turbulence Ahead on
the Path to Clear Skies.” There wouldn’t be much point in me
being here today, if I couldn’t speak plainly about some upcoming
turbulence getting in the way of where we want the aviation
industry to be. And unfortunately, turbulence in the immediate
future is very rough indeed.
In late June, those of us who live in the mid-Atlantic region
learned a new term—derecho. This came when we were battered
by a long line of fast moving thunderstorms, which led to flight
cancellations and major flight delays.
Well there’s another major derecho coming into our flight
path. It’s called sequestration, and it’s going to do a heck of a lot
more damage than the summer storms did. Sequestration is a fancy
term for mandatory across-the-board federal budget cuts set to kick
in on January 2nd. These cuts were mandated by the Budget
Control Act of 2011.
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I know many of the people in this audience are from other
countries, so it might be useful to provide some context about why
sequestration is so important.
The law resulted from last year’s battle between Congress
and the White House over raising our debt limit. Congress agreed
to raise the debt limit on the condition that the Administration
agreed to $1.2 trillion in cuts to the federal budget over a nine-year
period. The formula agreed upon was to have $500 billion of those
cuts to come from defense programs and $500 billion from
domestic programs.
We’re talking billions of dollars friends, including $100
billion in cuts to defense and non-defense programs in 2013 alone,
cuts anywhere from eight percent to ten percent of an agency’s
budget. So you are not just cutting fat, you are cutting to the bone.
As the American statesman Senator Everett Dirksen once
reportedly said, “A billion here and a billion there, pretty soon
you’re talking about real money.” I just heard on the radio the
economics editor of the Wall Street Journal say that the upcoming
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fiscal cliff—both the combination of sequestration and expiration
of tax cuts—could cause the stock market to lose recent gains.
There was to be, however, one escape clause for these
draconian cuts. A committee of Senators and Representatives was
created to develop a fiscal grand bargain, one that would have
resulted in some budget cuts as well as addressing the fundamental
issues behind our debt and deficit, entitlement reform and tax
reform. Unfortunately, this so-called super committee failed to
come to agreement and the sequestration budget cuts will go into
effect 99 days from today, unless Congress takes action.
Believe me, AIA has been working tirelessly to force the
issue of ending sequestration into the public debate. We’ve
sounded the alarm, noting that $500 billion in cuts to defense, in
addition to $487 billion in cuts defense is already absorbing, will
hollow our military force at a time when it would be very risky to
reduce our military posture, presence and operational readiness.
Yes, we get the fact that our nation must deal with its debt
and deficit problem. But even in the current fiscal environment,
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we believe our national security and the security of our allies and
partners depends on a U.S. defense force that is Second to None.
We have made the case to our Senators and Representatives
and the Administration that over the long-term, the U.S. needs to
invest in new military capabilities. We must have the means to
deny potential adversaries the ability to counter our technological
advantages that allow us to see battlefields with greater clarity and
accurately strike targets from greater distances.
We are already witnessing some of the world’s major
military powers making large strategic investments in
anti-satellite weapons, cyber attacks and weapons that would put
our current technological edge at risk. These investments are a
potent reminder of the importance of maintaining robust defense
investment and research and development funding. Sequestration
would undercut all that.
And remember, a more unstable world could have significant
negative impacts on the free flow of air commerce.
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We’ve also made the case that sequestration would do
significant damage to our economy. A study conducted for AIA
by George Mason University economist Dr. Stephen Fuller shows
that sequestration will put at risk just next year 2.14 million jobs.
It would increase our nation’s unemployment rate by 1.5 percent.
Also, sequestration would decrease the expected growth in Gross
National Product next year two-thirds. Talk about shooting
yourself in the foot!
Now just last week, we released another report from Dr.
Fuller that shows nearly one million of the job losses expected
from sequestration in 2013 will come from small businesses.
These small businesses are the key links in the supply chain that
major aircraft manufacturers depend upon. They are the backbone
of many small communities around the country. And many of
these small businesses are already hanging by a thread.
These potential impacts are a big source of concern among
the leaders of major aerospace and defense companies, and they
should be a source of concern to you. Lockheed Martin Chairman
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and CEO Bob Stevens recently wrote to a group of Senators the
following: “We do not know how many of our 40,000 supplier
contracts may have to be broken under sequestration. In fact, we
are very concerned that the most vulnerable segment of our
supplier base is the over 12,000 small and minority businesses.”
In a similar letter, Raytheon Company Chairman and CEO
Bill Swanson wrote, “All of our suppliers could be affected by
sequestration, but the impact on our small business suppliers could
be particularly pronounced. These small businesses are particularly
susceptible during times of economic uncertainty or distress.”
I might add, we’re seeing sequestration impacts right now.
Companies are deferring hiring new employees and planned R&D
investments with the expectation that we’re indeed heading for a
fiscal cliff.
Now there’s another aspect of sequestration that has received
less attention, but that is vitally important to this audience. And
AIA has taken a lead in drawing attention to this subject which is
critical to the aviation community.
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As I think you all know, we’ve initiated in this country a
major project to upgrade the nation’s air transportation system.
The NextGen system, when fully implemented, will transform
America’s air traffic control system from an aging ground-based
system, to a highly efficient satellite-based system, to meet a 90
percent growth in air traffic over the next 20 years.
But if sequestration goes forward, $1 billion will be cut from
FAA’s budget next year, and similar amounts for each of the next
eight years. If this happens, not only will the promised benefits of
NextGen evaporate, but FAA’s daily operations will also be
severely impacted. You can’t absorb these cuts by closing just a
few towers and reducing hours at a few small airports. The FAA
will be forced to make painful cuts to current operations and to
NextGen implementation. Given the magnitude of the cuts, a
report commissioned for AIA by the Econsult Corporation, states
clearly NextGen won’t be implemented anywhere close to its 2025
target.
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That means airspace capacity will not increase. So, as air
travel increases, our safe, but inefficient, air traffic system will hit
gridlock, putting a drag on the expected growth in general aviation
and commercial airline sales. Demand will soar past the system’s
ability to accommodate it; delays will return with a vengeance; and
ticket prices and cargo rates could skyrocket. The economic
engine that is air transportation – the sector that for decades has
propelled our nation’s GDP – will sputter and stall. And if the
U.S. air transportation system sneezes, you can bet that aviation
systems around the world will catch a cold. So sequestration could
have wide-ranging impacts well beyond our borders.
I don’t like it, but you can count on it if we allow
sequestration to take place.
Let me add that the Econsult study doesn’t even address the
cuts that would hit FAA’s safety and certification resources. These
are the dedicated government employees who review and approve
new product designs. They are the people who help our industry
sell its products in a highly competitive global market. Cuts in
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certification mean it will take longer for U.S. manufacturers to get
their products into the world market. Our aviation industry and our
economy can’t afford this if we’re to remain competitive.
For all these reasons, we’ve been mounting a very visible
campaign called Second to None calling the attention of elected
officials and the public to the peril we face from sequestration. I
like to call what we may soon face as our nation’s unwelcome
January demise.
Our stop sequestration campaign has been quite effective in
bringing the subject into the arena of public debate. Figures from
our studies are even being used in the advertisements of
presidential candidates. I have no doubt sequestration will be
brought up in the upcoming presidential debates.
And those of you from the U.S. can help us move the
discussion toward positive action. We need everyone to get
involved.
Please, contact your elected officials, to tell them that the
sands of the hour glass will soon run out. It’s imperative that they
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deal with our fiscal problems smartly, without allowing these
destructive budget cuts to go forward.
I can tell you with great conviction, there are members of
Congress who know that sequestration will be a disaster and are
working behind the scenes to develop alternatives that Congress
can vote on after the election. If we’re able to avert this
catastrophe, and let important programs such as NextGen move
forward unscathed, I know there’s much to be hopeful about,
including the benefits of this 21st century high-technology
approach to air transportation.
With NextGen in place, airplanes will be able to be guided
more safely and efficiently to their destinations. This will save
billions in operational costs and fuel costs, allowing airlines to
invest more into additional safety and operational improvements.
And recognizing the fact that we are in a global air transportation
system, AIA is working hard up at ICAO with airlines, airports and
air navigation service providers to develop a framework that
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ensures future air transportation systems like NextGen and SESAR
are harmonized worldwide.
I’d like to focus for a moment on one other promising aspect
of NextGen. Under the FAA Modernization and Reform Act
recently passed by Congress, the FAA has a mandate to expedite
the safe integration of Unmanned Aircraft Systems or UAS into the
nation’s airspace.
If we take the right path away from the turbulence of
sequestration, we’ll be able to fully integrate UAS safely into the
air space in a way that doesn’t disrupt air travel and allows the
many potential uses of UAS to advance.
The FAA Modernization and Reform Act requires new UAS
test sites and tools to expedite new UAS-related procedures in the
National Airspace System by 2015.
Here domestically, UAS will be used for traffic reports,
forest fire monitoring, pipeline inspections and a variety of other
civilian tasks. For example, NOAA has used the Aersonde
unmanned aircraft system for the past six years as a hurricane
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hunter, and geophysicists are using UAS to predict the location of
mineral deposits.
UAS have also been utilized in good measure to help save
lives here and abroad. For example, following the devastating
natural disasters that hit Haiti, Indonesia and Japan, Northrop
Grumman’s Global Hawk was deployed to analyze roads, harbors,
coastlines and bridges, showing relief parties the locations of
survivors and the quickest routes to them.
This is one aspect of a positive future path for our industry.
Another, is the coming advent of highly efficient jet aircraft. Last
week in Washington, during our National Aerospace Week
celebration, Boeing and American Airlines showcased a NextGeneration 737-800 known as ecoDemonstrator.
In partnership with the FAA, American Airlines is loaning
this airplane to Boeing to serve as the test bed for advanced aircraft
technologies. Technologies from adaptive, trailing wing edges, to
trajectory optimization and the use of biofuels.
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The ecoDemonstrator program will be a multi-year program,
testing a different suite of environmentally progressive
technologies each year for the next several years.
So taking an optimistic view of the future, if we can see
continued progress with NextGen implementation, the integration
of UAS systems into the air space, and new innovations like those
pioneered on the ecoDemonstrator aircraft, we can be flying
forward with nothing but clear skies ahead.
In closing, the choice we’re now facing reminds me of a
magnificent short story called “A Sound of Thunder,” written by
the late, great Ray Bradbury.
In the story, a hunter is transported back in time and allowed
to kill a dinosaur that was about to die anyway. Although warned
not to step off a designated path, so as not to upset the future
course of events, the hunter leaves the path and crushes a solitary
butterfly. He returns to the present day to find the butterfly’s death
set in motion a cascading series of events that transformed for the
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worse all aspects of everyday life, even our democratic form of
government.
This story begs a question. What path will we choose? Will
we choose our current misguided course of running off the path of
sound judgment and allow sequestration to go forward, with all its
potential negative consequences? Or will we get back on the right
path in which officials address our problems in a balanced bipartisan way. On this path we will provide government agencies
the resources they need to work with industry and the operators to
help create the 21st century air transportation system we all
deserve. This is the right choice. And, I’m confident that
ultimately our elected officials will come to their senses and we’ll
get back on the right path.
Friends, it’s been a great pleasure to be here with you this
morning. I very much appreciate your warm welcome and your
kind attention.
- AIA -