Aviation regulator being pressured to take their own medicine and cut costs

WASHINGTON – The Federal Aviation Administration, which has forced the airline industry to slash costs over the years, is now being pressured by the Transportation Department (DOT) to take a hard look at its own finances.

Since 1996, the agency\’s budget has grown by 70%, to $14 billion this year. Kenneth Mead, DOT inspector general, attributes this to the agency\’s "[un]sound business practices," among which are exorbitant labor agreements and billion-dollar contract overruns.

"The carriers have been forced to drastically reduce costs, including reneging on pension promises to employees, while the FAA has enforced no such discipline on itself," said taxpayer advocate Grover Norquist, President of Americans for Tax Reform (ATR) in Washington. "Since the FAA subsists on the revenue collected from the ticket taxes and fees, carriers have been compelled to raise prices while at the same time facing pressure from the FAA to keep prices down," continued Norquist. "It is an impossible situation."

The result is a deteriorating airline industry where most major carriers are losing money. An August 15 report on the airline industry by Morgan Stanley shows that American, Continental, Delta, and Northwest are losing money at the rates of $1.1, $1.2, $1.2, and $2.3 million per day, respectively.

The FAA, on the other hand, has faced no consequences for its "unsound business practices," but has continued to spend — and overspend – without concern. According to a DOT audit, a new radar display system, which is seven years behind schedule, will cost $1.7 billion, 80% more than original estimates. The FAA has also ignored its own cost estimates, instead favoring the estimates of it contractors. One contractor was paid $477,050 for a project that FAA estimates indicated should have cost 65% less. The audit found 34 other projects with payouts of up to $900,000 in which the FAA accepted contractor estimates over their own.

"The FAA needs to be held accountable for the money it controls, the taxpayer\’s money," said Norquist. "Americans and all air travelers should applaud the Bush administration for working to ensure that every dollar the government collects in taxes is a dollar well-spent," Norquist concluded.