Remarks of Craig P. Coy
Chief Executive Officer, Massachusetts Port Authority
Subcommittee on Aviation
Committee on Transportation and Infrastructure
March 6, 2003

Mr. Chairman and members of the Subcommittee on Aviation.

For the record I am Craig P. Coy, Chief Executive Officer of the Massachusetts Port Authority which owns and operates Boston's Logan International Airport and Bedford Airport at Hanscom Field, and has an agreement to operate Worcester Regional Airport.

I want to thank Congressman Capuano for that introduction. I also want to thank you, Mr. Chairman, and members of this committee for the invitation to come here today to lend my support to the reauthorization of the Federal Aviation Administration and aviation programs.

For an agency like Massport that is responsible for so many different modes of transportation - on land, sea and air - it is a particular advantage to have someone like Congressman Capuano on this committee who has shown such leadership and expertise on so many transportation issues. We appreciate his contributions, and the close working relationship we have developed.

At the outset, I want to say that I subscribe to the basic themes expressed in previous hearings this committee has held on reauthorization, and to the same fundamental faith: That despite the extraordinary investments we have had to make to improve security since America, and American aviation, was attacked on September 11; and despite the unprecedented economic difficulties that airlines and airports find themselves in today, air travel will bounce back, as it always has, and we had better be ready. With new terminals, new runways, more efficient and less delay-prone airports -- all of the new infrastructure investments that this industry and this committee talked about just two years ago when "unprecedented" meant unprecedented growth.

If it is possible to look to the future with nostalgia, the reauthorization of these critical airport improvement programs is directed to a day, not too distant, when the most pressing concerns will be the familiar ones of crowding, congestion, and delay.

Yet, security improvements are a critical first step in getting traffic back to normal. And key to this recovery is the availability of funds to reimburse airports, like Logan, that have undertaken substantial new financial burdens to improve security, restore public confidence in the transportation system, and return passenger traffic to where it was before the recent downturns.

Massport committed $146 million to construct the nation's first in-line baggage screening system for the Transportation Security Administration that Congress created to assume responsibility for airport security. And it was on the promise of federal assistance that Massport acted in good faith to accelerate the construction of this system.

It is a remarkable project and a great team effort. I want to commend the excellent job that Admiral Loy and the TSA have done on such short notice to mobilize the nation's transportation security response. I also want to recognize the outstanding cooperation that Massport has received from the TSA and its local TSA security director, George Naccara, in mobilizing Logan's security resources.

Massport, the TSA, the airlines and the contractors worked together to complete two years of work in about five months, including: 85,000 square feet of brand new bag rooms; 55,000 square feet of renovated bag rooms; over 40 electronic scanning machines; we've built 7 new electrical substations to handle the massive increase in electrical demand; and enough linear feet of new conveyor belt to stretch from Logan to downtown Boston, about 2.8 miles.

Federal reimbursements for the costs incurred in building this security system will be a key factor in our continued ability to complete our other important capital projects.

I want to thank the committee this year for successfully securing full funding of the Airport Improvement Program in the Omnibus appropriation bill the President recently signed for FY03. These funds are essential to help airports accommodate returning passenger traffic.

The Omnibus bill that you helped to pass contains $265 million in new funds for terminal modifications for explosive detection equipment.

It also creates an important new five-year $500 million program within TSA to help cover the cost of baggage screening.

In addition to these funds, Massport also supports a dedicated Security Facility Charge, or an increase in the ceiling on PFCs to support security improvements.

Another idea worth pursuing is one offered by DOT Inspector General Ken Mead for the creation of a capital revolving fund that could generate a steady stream of revenue for electric scanning installation and other security-related capital expenses.

Under his plan, the account could be funded with new federal resources and a limited amount of AIP funds and be administered by a private/public board. Airports would commit funds up front, as Massport has already done with our $146 million commitment for baggage screening, with the understanding of federal reimbursements down the road.

The assurance of reimbursement would be helpful in gaining airport support for achieving the security improvements mandated by Congress in the Aviation and Transportation Security Act. Federal guarantees would also allow airports to go to the bond markets for bridge loans to help meet their immediate capital needs.

That is why, at this critical time, we believe that all available resources must remain on the table.

Massport is sensitive to the concerns of those who oppose the future use of AIP for security related improvements. It is true that, historically, less than 2% of AIP grants have been used for security, while 17% - or about $560 million - was used on security in FY02 alone. We also agree that the long-term use of AIP for security purposes threatens the infrastructure we will need as air traffic returns to previous levels.

However, we agree with those in the administration who are disposed to use some AIP funding this year for security, and perhaps next year as well. We believe this will help airports through this transition period when hardening airports as targets of terrorism is, and must be, our top priority. Massport would support the continued use of AIP grants for airport security, provided it is both limited and temporary.

The generation of AIP funds in the future is more important than how they are distributed today. And we believe that the best way to replenish those AIP funds used for security is to get people flying again.

It's no secret that the airline and travel industries have born the brunt of the declines during the recent economic downturn. The Air Transport Association has testified that nearly half of all jobs lost since 9/11 have been in the aviation and travel sectors. The air carriers have reported a $10 billion loss in 2002. They expect a $4 billion to 5 billion loss in 2003. And they face recovery from a three-year loss that could reach nearly $25 billion.

A reluctance to fly, for whatever reason, impacts airports like Logan particularly hard, since our major markets are also served by competing modes of transportation. In the two year period between January 2001 and January 2003, Logan's passenger traffic dropped more than 18% and operations fell nearly 25%. In January 2003 alone, the number of airline seats at Logan fell 50,000 over the same month last year -- 4,000 fewer seats to New York's LaGuardia Airport alone, our top market.

At Worcester Regional Airport, virtually no AIP funds are being collected because the commercial airlines have abandoned the airport as national demand has declined. Not only does this deprive Central Massachusetts residents of nearby air service, it also sets back our efforts to use Worcester Regional Airport as a key part of a diverse regional aviation system.

In many ways, Logan Airport embodies the key issues that this committee, and others actively involved in the revitalization of American aviation, have been forced to confront and weigh since the tragic attacks on September 11, 2001.

The major investments that Massport has made in passenger security over the past 18 months have been matched by the largest airport rebuilding and renovation program in Massport's history.

Massport's Logan Modernization program is a $4.4 billion public/private effort involving terminal, roadway, facilities and parking improvements designed to effectively handle the recovery of passenger traffic anticipated by these reauthorization hearings.

The support Logan has received for this project from this committee has been absolutely vital.

In 1998, Massport received authority from the FAA to increase Logan's PFC collections up to $927.4 million through 2017.

These and other funds are being used to complete our International Gateway, build a new Terminal A with Delta Air Lines, build new roadways, covered walkways, and expand central parking.

These projects will make flying through Boston more comfortable and enjoyable for all passengers and lift the burden of overcrowding on the traveling public.

Likewise, our investments in soundproofing are designed to lift the burden of noise on the airport's neighbors. Logan was one of the first airports in the country to use FAA funding for soundproofing.

This year, we celebrate the 20th anniversary of our residential soundproofing program, and have you to thank for the more than $116 million in Massport and AIP funding that has been used to soundproof more than 7,300 homes and dwellings, and 35 schools.

Logan's standing as one of the most delay-prone airports in the country is also well known. Even now, when passenger traffic is down more than 15%, more than 1 of every 5 flights is delayed. In the future, AIP funds may be used for an airside improvement project that we believe will reduce delays significantly if we are able to remove the last remaining legal barriers to this project.

I do not want to understate the enormous financial strain that unfunded federal security mandates have placed on Logan and all airports as we prepare to meet the needs of tomorrow's expected passenger numbers under the relentless reality of today's financial arithmetic.

Since Logan accounts for over 80% of Massport's operating revenues, declining passenger revenues forced Massport to cut $51 million in operating expenses, lay-off 15% of our workforce, and delay more than 37% of our capital expenditures - 139 out of 581 projects.

No on-going construction was interrupted and all major PFC-funded work continues. Yet after 9/11, Massport was able to accelerate security projects only by deferring or canceling other important capital projects.

We did this because we are committed to providing our passengers with the best possible security, as quickly as possible. And we have opened our wallet to do the job right.

Yet, this obviously is being done at the expense of other airport facility improvements. And to the extent that we receive reimbursements - whether from TSA, a dedicated Security Facility Charge, or other sources -- we could move forward with other deferred projects.

Since Massport is self-funded with user fees and receives no support from state tax proceeds, security reimbursements would also provide financial relief to hard-pressed airlines by reducing the pressure on us to raise their fees.

I want to thank you, Mr. Chairman, and the members of this committee, for all that you have done to secure passage of AIR-21, AIP and other important programs which provide critical federal funding for airport improvement. I also want to acknowledge the support that this committee has given to regulatory streamlining efforts for infrastructure improvements, like runways.

Massport has accepted the financial burden of helping the federal government meet its new mandate under the ATSA of providing security for those who use the our airports. Massport's ability to meet our own mandates to provide for the future transportation needs of our customers will be influenced by support we receive from the federal government for the added security costs that you have mandated.

Whether AIP, dedicated PFCs, or new TSA grant funds are eventually used, federal reimbursements for enhanced airport security will achieve our goals -- and the goals of this committee -- by giving airports the means necessary to build facilities to accommodate passengers once airline traffic returns, as we all know it will.

Thank you and I will be happy to take questions.

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