our business. we don't think that cargo business or passenger airline aviation has to bear the full brunt of this cost when there is such a great public benefit from nextgen, and so this has to be a cooperative effort. it has to be born by many of us together. that's why we believe the faa reauthorization bill must assist the aviation community with the exhibition necessary to move nextgen forward, and don't -- let's not forget about the airports themselves. i had breakfast with one of your speakers who will tell you about an airport he took over as a volunteer. he took it from the can to one the best airports in the country. that is a great story. we can do that all over the place. slashing funding for airport improvement programs, however,

is a classic example of cutting off your nose despite your face. we need adequate funding levels to maintain, modernize, and expand our airports. how? investing in aviation funds is critical as much as the overall amount. congress must provide budget fire walls ensuring that all dedicated revenues are utilized exclusively for their intended purpose. marion and others know what happened in the highway deal. there's more highway money going to everything but highways, and we cannot have that in the aviation business. that means, by the way, that airport and airway trust funds shouldn't be used to pay for security costs, but specifically for air traffic and airport maintenance and improvement. all this 9/11 cost is a societal

cost, and we need to find a fundamental way to do that. by the way, when it comes to building infrastructure or making changes to manage the air space, we need to streamline the project review and approval process. it takes far too long to build anything in this country, and everybody knows it. anybody's that's been to chie no goes there one year and stays in a hotel with a hole next door, and go there the next year, there's a new hotel there. we spend years in the united states getting permits. we have got to take another approach. the bottom line is this. we have a choice. we can make smart investments to ensure the aviation system remains one the crown jewels of our economy, or we can starve it so badly of needed funds and watch jobs and economic growth disappear. congress has many difficult choices facing it today and

everything from entitlements to budget and debt, but aviation success has got to be one of them. it holds this economy together on a global basis. now, one way to restore consistent profitability to the airlines is to bring more stability to what are now very volatile energy prices. as i said, this could be a whole other meeting. jet fuel prices increased by more than 20% in the first two months of this year alone. it's probably up more than that now, and cutting deeply into aviation profits if you look at the latest numbers. consider this -- if jet fuel prices increased from $12 at any time 15 last year to $3 this year, it raises the fuel bill by $15 billion. now, that's getting to be a large number. when it comes to energy, we are shooting ourselves in the foot in this country. we have locked away vast

reserves of oil, and oil shale and natural gas on federal lands and off boast coasts. meanwhile, we send hundreds of billions of dollars a year overseas to buy other people's energy and a lot of it from dangerous, unstable places. does that make any sense to you? i think it makes less sense than it did a year ago. that's for sure. federal lands alone are estimated to contain 3.31 cubic natural feet of natural gas and 31 billion barrels of oil of what we know now and there's more to find. producing some of that energy would reduce our imports, ease volatility, create american jobs, and generate huge tax revenues to reduce the deficit. it doesn't sound like a hard decision to me. even less sweeping reforms can make a difference. imagine the impact more runways

would have. there's fewer planes unnecessarily circling in the air, idling on the ground, and burning up fuel. we have to increase domestic energy production all across the board. traditional and alternative, and our national and our economic security depends on it. now, to another system which is the labor system. more reasonable labor policies would also have a tremendous positive effect on the airlines. labor is your number one cost. we need strong government action on funding, infrastructure, and energy, but on labor, we need government to ensure a safe working environment and worker's rights, and then get the hell out of the way. if you look at what's going on now in this industry with this government pushing labor agendas that don't help anybody, we've got a real problem. we're deeply concerned about

politically driven proposals by congress and the administration that will undermind the success of this industry. we are very pleased that the house version of the faa reauthorization bill included a provision repealing a recent ruling by the national mediation board and head of the afl-cio. the national -- excuse me, nfb ruling would overturn more than 70 years of precedent and make it possible for a union to be organized without the support of the majority of the employees. in that class and make it virtually impossible to desert my a union. doesn't sound like a good idea. the way the rule was rammed through the board where thousands of comments were ignored, the majority member was excluded and dissents censored

underscores its blatant political nature. the time-tests rule by the board was fair, it worked, and it should be maintained. in a separate matter, i want to say that we'll do everything in our power to oppose the national labor relations board attempt to prevent boeing from building their new 787 at its nearly completed plant in south carolina and forcing them to build the plane in washington state. think about the implications of this. there's lots and lots of states, 24 or 25 i think that are right to work states. we'll tell them they can't invite business into their state? i think this is going to be a hell of a fight, and i'm looking forward to it. we're on a slib riedel slope when the -- slippery slope when the government intends to interfere with business decisions to

reward politically favored groups, and it ain't going to happen in this country because we're not going to stand for it. let me just wrap up with a couple of comments. i want to say something about cargo and business aviation. when discussing aviation, we can never overlook at importance of cargo and business aviation which helps create jobs, improve productivity, and facilitate trade. i could give a separate speech on each of these topics, but let me mention a few issues. on cargo, we must respond rationally to security threats and strive to elevate security and trade facilitation simultaneously. these two goals are not mutually exclusive. security mandates will continue to change as the threat level changes. how we fashion an implement security mandates makes all of the difference. we must avoid overly burdensome

and restrictive rules like the failed 100% program that damaged our economy and badly undermind the just and timely delivery system so vital to our economic growth, and by the way, have we learned a lot about that through the terrible happenings in japan in recent weeks. instead, we should be developing more flexible rules that meet the same goals and are more efficient and productive manner. further, we should be building off of the success of existing trusted shipper programs and harmonizing them with the international community rather than creating new and redundant programs were business. another cargo issue of importance is the harmization of regulations governing the shipment of lithium iron on batteries which the chamber strongly supports. you know, it seems like a small issue, and these batteries are,

in fact, small in size, but they play a critical role in our mobility and productivity, powering electronics that keep us on the go like laptops, smart phones, and all the toys my grandchildren have. harmonizing rules with international standard enhances safety and minimizes the financial and technological burdens of implying with multiple and inconsistent regulatory requirements. this is a very important issue. we have to get it right. on business aviation, we think the attempt to make public flight plans for business aviation using an ill-advised populist movement that should go the way with some of the other things we hauled away from here. it opposes the use of the aviation system and there's no reason for it.

we weighed in on the faa reauthorization, and we're pleased that their version of the faa bill blocks the agency from moving forward. now, let me conclude, carol, i'm afraid i'm into your schedule already. excuse the pun, but i've given you a quick 30,000-foot view of the basic steps we can take to improve the aviation industry, an industry that is so critical to our economic success and our way of life. much like the u.s. economy, u.s. airlines are climbing out of a deep hole in the wall, and we have a long way to go to be financially strong. to assist in that process, we've got to redouble our efforts to educate policymakers about the importance of aviation. we must ensure federal policies recognize the rink between the national -- link between the national aviation networks and jobs, between the link and economic

development and global competitiveness, between this link in the quality of life and between it and national security, and the industry itself must continue to innovate, transform, and reinvent itself to meet growing demands to force the profitability and meet competitive challenges from around the world while improving safety, and today, you're going to hear ideas on how to strengthen the aviation system from some of the nation's leading authorities. right now, we're going to start talking a little bit about infrastructure, so i'm going to turn this over to jackpotter. he joined us after a lifetime and a half as the postmaster general of the united states, and he's working with us on a major process to look around the world and the global supply chain and how to asis it on a

policy basis. with him is janet kavinoky leading the transportation efforts including the efforts on the infrastructure side. i'm going to leave it to you guys. i want to thank everybody for being here. this is a very serious piece of business. it holds this nation and the rest of the world together, and we can't screw it up. thank you very much. [applause] >> the remarks this morning and back live now at the chamber commerce and short comments of the president of boeing's president and first the annual awards presentation. >> this is a perpetuating award, and we are really thrilled this year's recipient is none other than ca howlett.

c.a., if you could come up here. it's really interesting. he was doing things with a lawyer and then in 1970, the mayor of phoenix asked him to become the chief of staff. he was to have oversight for sky harbor operate, the phoenix international airport, and that's really hue how -- how it all started. did he fall in love with airlines? well, he certainly became familiar with him. i can't say how much his affection grew, but i know it did because over the years, he continued to be involved with airlines, and then along comes another offer that was, i think this was in the early 1990s, and it was to join an airline called

america west, and ca took the offer, and it obviously became a very exciting endeavor. it then brought doug parker into the picture, and doug and ca and a team of people went forward, and as you know as the story goes, it is now all u.s. air. thanks to that team, thanks to the work that ca did, and his career has so positioned him to do interesting and important things in aviation, but the one that i would like to speak about just very briefly is what ca was responsible for doing at the time of 9/11 because as a man with a business background, he knew the importance of keeping the airlines literally solvent, and so he was the one who really worked with the hea to create

what was later known as, of course, the guarantee loan program, and it was ca who came around and said we have to have the air stablization and safety act, and he was really responsible more than anyone else for seeing that that happened and seeing that the loaning, the funding of the $15 billion became a reality, and so is there anyone more appropriate to make this presentation to than ca who is now trying to retire, but still very involved with the airlines, obviously still involved with u.s. airways, and ca, the only other thing i want everyone to know about you is there is no better chamber man anywhere. he is not only on the board of the u.s. chamber of commerce, but he is also on the board of the arizona state chamber of commerce where he was also

president. he serves as of today as chairman of the u.s. chamber's public affairs committee, and he also served as the regional vice chairman of the u.s. chamber of commerce from 2004-2007, and ca does not like people to shower him with praise, but he is a man that this airline industry really benefited from, and it is because of that, ca, that we are presenting you with the carol b. hallett award, and here it is. [applause] >> now, a word or two. >> carol said a word or two, did you hear that? well, first of all, let me

disvalue that you too can be honored and have this recognition if you just change your name and it sounds like howlett. a funny story, we were both in the reagan administration at the same time, and it used to create quite a bit of confusion over people trying to get a hold of one of us because we were in different places, and one day, the phone rang and the secretary said, mr. howlett, secretary weinberger's on the phone. i said for me? he said, you don't sound like carol. i said, no, sir, i'm not. and click, that was it. [laughter] look, i'm very honored and privileged just to have this recognition. i'm particularly pleased that it coming from the chamber and with the chamber. i think many know one of the reasons that i really enjoy the

industry is because it is so competitive and so dynamic. i am a true believerrer in the free enterprise system and capitalist system. that is the system that creates the jobs. you and your organizations all create the jobs. we provide as you heard over and over again the 6%-8% of the this growth domestic product, but what i want to say beyond thank you is i'm not a public figure, and i worked really hard to sort of be in the shadows. as a matter of fact, one time a guy wrote an article saying we don't know exactly who he is or what he does, but he's a shadow why figures that always seems to be around. somebody recently wrote about me saying, realm, you probably never heard of him, but he's a staple in washington. staple? i think i've just been insulted,

because i think of that as a can of tomato soup back in the cup board. on behalf of the team i've been blessed with ceos and boards of directors at america west and u.s. airways who have really been supportive and who have worked on the same philosophies and principles of trying to provide good customer service. at the same time, we are trying to return something to our share holderses in a difficult industry that lost $60 billion in the last decade. the most enjoyable part of my career and what i want to share with you is what most of us do is really a part of a team effort. it's team ball, and so i really would only accept this, carol, with the notion that my team over the years and all the

people i've worked with at the two companies and candidly at ata and the chamber and almost every one of you in the audience today, i want to share this with you and i want to thank you, and i've decided that for having looked at the program, carol, going forward my new business card says ca howlett of council of u.s. airways. [laughter] thank you. >> thank you, ca. [applause] we hope your shadow will be here often at the chamber. thank you. i know we are really pushing along, and, again, this is such a fabulous program that we have, and now i'm going to ask you to really eat silently because we are going to have our lunch and keynote speaker next, and he has agreed to speak over your

clatter, so i hope that as you're mother taught you and as thomas donohue says, to also use your silverware silently so we will be able to enjoy this next presentation. we first want to thank boeing and jim albaugh for being the key sponsors in the entire event. it's a big undertaking and we are most grateful to boeing, and jim, we really appreciate your presence here today. i don't want to take any time away from what he is going to have to say other than jim albaugh has been with the boeing company for 36 years, and during that 36 years, he has had thee most incredible background. it's really an amazing career for any one person.

he has been president and ceo of so many different divisions and businesses at boeing that it would be hard to remember them all, but he started out as president of the rocket dyno propulsion and power division and then president and ceo of boeing space transportation, and then president and ceo of boeing integrated defense systems and also president and ceo of the boeing space and communications division. i believe he was president of a couple of others that i may have missed, but in every one of these positions, it was because of jim's leadership and capabilities that he was moved to the next presidency to take over once again and make that a stronger program, and so when he speaks to you today, i know you'll see why because he's a great speaker, but he's also a

great leader, and needless to say, jim, you have been the right man at the right time for so many different jobs at the boeing company, and now you're the right man at the right time to be the luncheon keynote speaker, so please come forward. [applause] >> well, good afternoon, everybody, and thank you for that introduction, carol. you can see i vice president had a very -- haven't had a good time of holding on to jobs. i keep moving around. i'll touch on not only commercial aviation, but defense and also space as well. it's good to look out at the crowd. i see a lot of good friends, customers, competitors, and i should have checked the program because i see allen mccarter is talking after me, and i was hoping i'd talk after him. we're great friends, and it's a healthy competition, and it's very good for the industry.

i want to talk about the importance of aerospace, you know, talk about the state of aerospace today, and talk about some of the challenges that i think we have. i really do believe that our industry is at a cross roads. nobody's ahead of the united states in aerospace, at least not yet, and we are the industry's leader and build the industry's most capable airplanes. look at the programs we have coming from the department of defense, they are really unparalleled. the commercial satellites, military satellites we have do things that are just phenomenal and our orbital man space program is second to none, and unfortunately we're parking the shuttle sometime very, very soon, but i think the leadership position we're in is threatened, and certainly there are other countries that would like to come after the dominance we enjoy right now, and, you know, we're not in the business of reclaiming our lead. we have the lead.

i think the question is are we going to take the steps necessary to maintain that leadership position, or are we going to allow aerospace to join that list of u.s. industries that we used to lead? i'll talk about that today. you know, to understand why it's so important, let's take a look at what aerospace has done for our countriment i was very fortunate to join aerospace in the last quarter of the 20th century, and to me, aerospace really defines the 20th century. you think about commercial airplanes and it shrank the world and brought countries together and in world war ii you think about the tens of thousands of airplanes build and technologies that bring us together and certainly when we walked on the moon for the first time, it changed forever how we look at the world around us. i'm convinced that aerospace

defines the 21st century. i think the question we have will it be u.s. aerospace that does that? i think that's a critical question because aerospace truly does help to keep america strong. you know, there's no industry that has a bigger impact on our economy than aerospace. look at exports, there's a $53 billion surplus as a result of what the people in this room do. you know, president obama called for doubling of our exports over the next five years, and aerospace will be in a leadership role in doing that, and if you look at the impact of civil aviation alone has on the country, it's really breathtaking. it's responsible for 12 million job generating around 6% of gdp. what's the commercial marketplace look like today? it's vibrant, growing, challenging, but rapidly changing as well. those of you in the room who operate airlines know what

happened in the last 15 months. the market really has come roaring back. 2010 was a year everybody really enjoyed. it's been subdued somewhat this year as a result of oil prices, but still, in a very positive position. in boeing there's a seven year backlog, $263 billion, and with air traffic increasing at 1.5 times the world gdp, you know, we think the future is pretty good. you know, our estimate is that the gdp is going up over the next five years between 3.5%-4%. you do the multiplication on that and not discounting what's going on in northern africa or the fuel prices, over the next 20 years, we believe there's a market for some 31,000 commercial airplanes or $36 trillion, and that's a marketplace a lot of companies and countries with eyeing. there's a lot of factors to

shape the market, and i'll talk about some of them. first is globalization and the second is competition and the third is some of the shifting demographics we have in our work force. let's talk about globalization, you know, first. the world is very interconnected, but i think that interconnection certainly has made the world much more complicated as well. we saw the earthquake in japan and despite the fact that the epicenter was some 4,000 miles away from our manufacturing facilities in pugot sound, it impacted us. tom friedman was correct when he said the world was flat. globalization means many of the partners we deal with and you deal with are outside the united states and globalization does drive air traffic. we went back and took a look at air traffic back 20 years ago, and about 72% of it was in the united states and it was in europe, and we project out

another 20 years, and the number is 45% and soon half the world's gdp comes from emerging companies and that changes the marketplace. we've seen increased competition, and we know it's been interesting between air busts and boeing and allen would agree with me it's rapidly ending. in other companies and countries are attracted by that $3.6 trillion market i talked about. there's china and dray zill, canada and russia. .. to 22,000 feet

that's hard to do. i have no doubt that they'll be able to build a very good airplane. at the same time, you know, china is the largest market that we have. and they've gone from being a supplier and a customer to a supplier and a competitor and they have done that in about 40 years. they have decided to make airplanes. airplane manufacturing a national priority. i'm sure they will be

successful. now, i think that presents another issue for many industrialists in the united states. it is a huge marketplace. it's a marketplace where you have to pay to play. and like any country where we put technology, we have to be very careful that we're not giving away technology that ultimately could help a competitor compete with us around the world. you know, it's interesting, you know, china there you go and it's amazing every time that i visit the improvements, the changes that have been made and certainly they will do that in their aerospace industry as well. meanwhile, military threats have certainly evolve as well. during the cold war we knew who our enemy was and we trusted them not to used weapons of mass destruction. today, oftentimes, we don't know who that enemy is but ultimately given the chance. they will use those weapons. they have done it before. and as a result we see a lot of shifting dynamics in the department of defense. a lot of focus on the asymmetrical threats and

certainly a changing mix of platforms in the security of defense. the demographics are a big deal, i think, to all aerospace companies and right now about half of our engineers that work for the boeing company could retire in the next five years if they chose to do so. and that's the same story at lockheed, raytheon, northup grummond and all the aerospace contractors in the united states. we simply are not producing enough engineers to support the need as people choose to retire in the years to come. you know, to me what's that's going to contribute to what i call the intellectual disarmament of this country. and that along will put our country at risk. if we continue on this path we could lose our lead in aerospace and break that long-standing continuum of capability in our industry, and our economy will lose an important engine of growth and our country also could become more vulnerable and less secure.

now, that's kind of a tough picture to maintain but, you know, companies like boeing will survive. we will go to where the years are. if we are not producing them in the united states we will go where they are, where the capabilities might exist. in my view, you know, our industry right now faces, you know, five different threats, you know, one the industrial base, our weakening industrial base, a lack of innovation and technology, a good environment and a level playing field and our industry as an industry and as a country we have to decide, you know, how we're going to respond to those threats. you know, today i think we take our industrial base for granted but we do so, i believe, at our own peril. think about what a strong industrial base has meant for this country, you know, over the last 60 or 70 years. it was the arsenal democracy as i mentioned during world war ii. it put a man on the moon. it made america the world leader in space, commercial aviation and defense.

but a strong industrial base is really is not a given. it's a product of the right policies, the right investments, the right priorities but also it takes a lot of time to put in place. you know, we don't have to look very far to see what can happen and how quickly an industrial base can be diminished. you don't have to look any further than the u.k. they used to have a great tradition, both commercial and military airplanes, and now they're buying f-35, c-17s, you know, apaches and chinooks as well as airbus and boeing airplanes. they don't manufacture airplanes in their country anymore. they realized they needed an industrial policy in place and they put in place and it will take years and it will take decades. when we don't invest in development programs and when policymakers don't consider how procurement decisions impact the industrial base, we risk losing talent and expertise that has taken us decades to build up.

our engineering challenge is not a fixed asset. if they don't have work to do in the area ospace area, they will go to other industries or they'll retire. and reconstituting that capability will be very difficult to do. you know, right now believe it or not with the f-35 in the flight test program, there are no department of defense airplane programs in development. and i think this is the first time that we've been in that situation in probably over 100 years. you know, my view as we risk following the u.k. and dismantling our industrial base if we don't do something about that. now, you might say that we're building airplanes for the military so, you know, that's not a problem from an industrial based standpoint. i would admit to you that being a viable contractor, to be an integrator of very complex systems, you have to understand how to do r & d. you have to take r & d into detail designed and into

production. you have to run your production systems and you have to have a very healthy supply chain. and what we're seeing right now with no new starts in the department of defense is we are losing our capability to do detailed design. we're losing our capability to transition design into manufacturing. once that's gone, it will take a long time to reconstitute. so i know this is an issue -- that was one of the problems we had on the 7a7 program. we had not done a new development program since the 777 and we paid the price as a result. on the space side, tens of thousands are very experienced engineers are going to be going out the door, you know, very soon. once we park this shuttle, you're going to see, you know, thousands and thousands of people who have taken 50 years to really build that capability up and go out the door. you may have seen recently where united space alliance who operates the shuttle for the -- for nasa, they announced they're laying off 2500, you know,

engineers last week. and, you know, once the shuttle is parked this summer, i would submit to you and the article in "usa today" notwithstanding, i would submit to you that the chinese will walk on the moon before we once again put an american into lower orbit and it's unconscionable that we would do that. there's steps to take, every country is concerned about strengthening their industrial base. and the one we have in this country is one of market forces that in my mind that is not a clear, coherent or comprehensive-enough policy for the united states of america. and i'm not saying we need a policy that defines specific outputs and production or that we need to build things that people don't want. but we need to start a dialog about an industrial strategy to ensure the long-term viability of our defense and industrial base. it's critical to the long-term

economic and national security of this country. we can't wake up a decade from now and decide that we want a capability and find that we don't have any contractors that have that capability or have the ability to do development programs, and i fear that that's the direction we might be going. this is an area where we can engage in dialog. the industrial base might not seem essential but think about what commercial aviation has gotten from the defense side, you know, things like radar, things like gps and the heads up display, satellite communications, all things, you know, very important to what we do. and i could go on and on with that list. if you realize the industrial base affects everyone in this room. i find it curious that the industrial base was not

considered during the tanker competition or at least it wasn't apparent to me that it was the government was willing to put a lot of work offshore and, unfortunately, that didn't happen. but i don't think anybody should think that just one program is going to be enough to sustain the industrial base in this country. it's not. you know, the second threat to america's leadership in aerospace concerns innovation and technology, and we're seeing much more competition on the commercial and defense sides from around the world. in commercial aviation, i talked about the new entrants from canada, from brazil, from russia and from china. and we're also seeing, you know, other people enter the defense market as well. i know that many saw the new j-20, the chinese stealth fighter as a threat. you know, i really saw it as a new competitor in the global defense marketplace, and it will be. and i think to win in the face of increasing competition and subsidized competition, the only

way that we can do that is through better innovation and technology. and at boeing what we always say we want to do is to make sure that we're building today's airplanes -- we're building tomorrow's airplane when the competitor is building today's airplane. the 787 dream liner is a great example of that. it's an airplane to say it's the first new airplane of the 21st century and i know that airbus delivered the 8380 in the 21st century but i would submit to you that the 787 is the first airplane to use 21st century technologies in the manufacture and development of the airplane. you know, some companies build an airplane and then they try to sell it. what we do we sell an airplane and then we try to build it and sometimes that presents some issues for us. [laughter] >> you're reading about some of those, i know. but what it does, it always provides an airplane that people

and will continue to do that. and from my perspective, there's certain ingredients to innovation that you can't be successful without. you know, first of all, you have to have a desire to be the best. you have to compete on the world's stage. you want to make sure that you're always building the best that you can in the markets that you serve. you also have to have a commitment to invest in technology and also in the human resources necessary for innovation. you also have to have a culture of openness where people are very comfortable talking about radical ideas, pushing the envelope and changing the way things have always been understood to be built or to be designed. and then you have to have a skilled, capable work force and leadership culture that encourages innovation. and then i think you also have to have an awareness that the best ideas don't necessarily come from your company but can come from other companies and also other countries around the world. you know, innovation is very important to my company.

i know it's very important to all the companies that you represent. but it also, i think, represents, you know, america's future. you know, studies have shown that technology and innovation have been accountable for about half of our gdp over the last couple of decades. and looking ahead, innovation is going to be just as important as we go forward. just imagine in aerospace some of the innovations that we could see. i mean, you could see smart composites that actually morph in flight, you know, based on the aerodynamic loads that they see. we'll have airplanes that fly on bio fuels i'm sure very soon and billy glover i know will talk about that later today. you could have hyper sonic wave riders that skim across the top of the atmosphere. those are all things that are very doable and will be done. i think the question is, will we do them or will somebody else do them? there are a number of policies that i think that are important that encourage innovation in america and certainly the r & d tax credit is one of those.

and wherever r & d goes, innovation and economic growth follow. the tax credit will expire once again at the end of this year, and i think we all subscribe to the fact that we need a permanent, stable and predictable incentive for research in the united states. and when you think about the tax credit, the r & d tax credit, last year it supported some 18,000 different companies and president obama wants to spend 3% of our gdp on r & d and certainly a permanent tax credit will help us do that. you know, the third major threat of american aviation, i think, comes from the environment. it will be something that will limit our growth if we can't figure out, you know, how to reduce the carbon footprint that we have. i think everybody knows that about 2% of the carbon footprint in this world comes from commercial airplanes. it's not only c02, though, that we're going to be asked to reduce. we're going to be asked to reduce noise. traffic density is going to be an issue and i think we're going to be limited also by air

infrastructure. and when we take a look at the environmental issues we face, there really are five areas we're focusing on that are aerodynamics. we're focusing on lightweight materials. we're working with the engine companies on more efficient engines. we're looking at biofuels and we also think that there's great promise in atm and i know that's a subject that has been talked about here today and will be talked about, i'm sure, a little bit later today. you know, at boeing, about 75% of our r & d has direct applicability to the environment. and it's amazing when you think about what we've achieved over the last 50 years, there's been a 70% reduction in fuel consumption on fuel on airplanes and a resulting c02 fuel reduction. the progress continues today. if one looks at the 747-8 airplane that's in flight test right now, it's going to burn 16% less fuel than the 747-400 that it replaces and if one

looks at the 787 dreamliner will have a 7% reduction and a 737 and 777 that we're delivering today much more efficient than the ones we initially delivered to our customer years ago. in terms of noise, another incredible story, you know, over the last 50 years we've been able to reduce the noise footprint by some 90%. infrastructure, though, is going to be a limiting factor in the u.s., as many of you know it, can take up to 20 years to get all the permits in place and also to build a new runway. and you compare that to what's going on in places like china where they plan to construct from 45 to 55 new airports over the next five years. and to the best of my knowledge there aren't plans to build any new airports in the united states during that time period. air traffic management, i think, has huge potential. it could reduce the carbon footprint by anywhere from 10 to 20% depending on who you're talking to.

when you look at the money that we're spending on the 787, you look at the money airbus is spending on the a350, you know, we will reduce the carbon footprint on those two airplanes dramatically from the airplanes they replace. but a similar investment for next generation air traffic management system will reduce the carbon footprint from 10 to 20% on every airplane flying today. it's an investment that we need to make. let me talk about the policies, though, we need a sound approach to the environment that achieves real results but does not disadvantage u.s. industries relative to international competitors. and i'm very pleased that there is an international body that's working to make sure that we have consistency in those policies, you know, around the world. we need a level playing field where everyone in aerospace operates within a rules-based

trading system. and we were very pleased to see the recent w.t.o. decision that there will be a message with everybody we're competing with that the rules-base is important and that we all need to play the same way. vigorous enforce of the w.t.o. rules we hope will send a message and i think it will. another big issue for us is the export/imimportant bank and i know it's important to talk about banks. last year they guaranteed some $34 billion worth of loans which helped us sustained over $200,000 jobs in the united states of america. and 85% of their loans, you know, directly supported small business in the united states. and it's also a bank that didn't need to be bailed out. it's actually a bank that returned money to the united states government. since 1992, you know, they have

put $5 billion back into the treasury as a result of the loan guarantees they put out there to many of the airlines that i know that are in this room. and if one thinks about, you know, what it takes to reauthorize the bank, you know, we think that it will be a real step in the right direction double the exports that president obama is talking about. now, we can get all those things right that i talked about but unless we address the issues we have with education, i don't think it will matter because the future of aerospace, i believe, is dependent on the educational system we have in this country. it used to be the best and bright jessica to the united states. they studied and they stayed. and now they study, they go home and they compete with us. you know, we have, as i mentioned, half of our engineers who can retire in the next five years. that's half of 36,000 engineers. and we know we're going to have a very difficult time replacing them because not nearly enough engineers are graduating from college. it's about 60, 70,000 a year.

and you go to a country like poland, it's about the fifth of the size of the united states. they're graduating just as many engineers as we are in this country. and you have to wonder why american students, you know, aren't embracing engineering as enthusiastically as they are in other parts of the world. and i think part of it is the fact that engineers really aren't celebrated in this country the way they should be. i was in moscow -- i think it was in september. i went to the cemetery right outside -- right outside of red square and i was walking around and, you know, they had the graves of many important historical figures in the 20th century in russia. they had artists, you know, and they had play wrights and they had government officials and people from the military but buried among, you know, those very famous people we all know were many of the engineers and scientists and physicists of the soviet union during the 20th

century. you know, all very famous airplane designers and they had places of stature among the rest of the famous russians. and it made me wonder when was the last time we saw the picture of an engineer on the cover of "time" magazine or some journal in the united states? you know, i think it's also interesting to note that in china, you know, their leader today is an engineer and the heir apparent is an engineer as well. and i think another reason why too few students today pursue careers in math, science and technology is because we haven't really inspired them with exciting goals. i think young people around the world are looking for careers where they can make a difference, where they can grow and reach their full potential. and where they can connect with something that's greater than themselves. and, you know, i think we can recapture some of that imagination and my generation and many of you were drawn to

aerospace because president kennedy's mission to go to the moon but we have many important things to do in this country as well. and i think that the real goal of engineers of the next, you know, 50, 60 years is going to be to help save the spaceship we're all on together and that's the planet earth and i think they will have a chance to work on things like energy dependence, global warming, you know, health care and they're going to do tremendous things to rebuild the infrastructure and i know they'll do amazing things in aerospace as well. but if we're going to inspire people to go into those s.t.e.m. related careers we have to have a good k-12 educational system and despite the fact we are spending more than other countries, we certainly aren't having the results. and i know in many states right now are struggling with budgets. especially in the state of washington we certainly are but if there's one thing we need to put around, a defense around relative to reduced spending it can't be education. and all of us have a role -- i

know every company in this room is doing something to support s.t.e.m. but at the end of the day, education really is a public responsibility. and if there's one thing that our country should guarantee is every child growing up gets a good, quality public education. now, in closing, you know, maybe i've painted a challenging -- a challenging picture of the future, and i think it is challenging, but i have no doubt that we're going to be able to take the right steps and we're going to continue to keep the lead that we currently have today. when you go back to 1903 when the wright brothers first flew, you know, they flew 120 feet in 12 seconds and, you know, i was thinking about that. 120 feet, you could put that flight in the inside of a 747-8 intercontinental, you know, it's amazing how far we've come, you know, decades later, neil armstrong went and walked on the moon and during the '60s all the

astronauts were given a little personal packet that they could put some personal belongings into and neil armstrong, whom i know many of the people in here know, what he asked for was a piece of the wood of the propeller of the 1903 wright flier and also a piece of fabric from his wing. that thread started with the wright brothers and continued, you know, through apollo is going to continue today. and i don't think that anybody can do what america can do in aviation aerospace. we've proved that time and time again. you know, the lead that we have today is ours to keep or it's ours to lose. the advantages that aviation gives the united states of america is ours to keep or it's ours to squander. by every measure i think, you know, aviation helps answer, you know, the toughest questions about america's future, a future that i think will continue that we have the power to shape. thank you and i think, carol, questions, is that right? >> that is correct, jim.

we are going to take about five minutes of questions. but let's first give jim a big round of applause. [applause] >> we can start out with questions from the floor, and i can't imagine that there wouldn't be some who wouldn't like to ask a question of jim albaugh. all right. we have the first one right down here. i believe that's don phillips who is waiting for a microphone. >> can you hear me? yeah, okay. >> i can. >> you mentioned

>> i see a lack of a infrastructure. you don't have to go very far outside of the united states to see that other countries certainly have passed us in the quality of infrastructure that they have. i'm talking about roads, talking about high-speed rail, talking about airports, you know, air traffic management -- i hope we don't get left behind there as

well. >> jim, i might just follow up on that because tom donohue in his remarks this morning talked not only about supporting boeing in your effort to stay in south carolina, but he also talked about the importance of infrastructure, and the chamber appearance huge infrastructure effort underway where the public/private partnerships are a big potential. obviously the public/private partnerships are very popular in other parts of the world and we really see a very important role in business in what we're doing and we hope you and the boeing company and airbus and others will take a lead in helping us come up with new ways in which we can do the necessary financing besides taxes for the infrastructure of the future, and that's just not airways and waterways and highways but it's

also broadband and certainly the electric energy grid and other aspects. >> well, we certainly will and i know that's something ellen and i totally agree on. a lot of limiting factors to the airlines, you know, i mentioned some of them, you know, atm, airports, the environmental questions. you look at some of the threats we have in europe. they're not building airports. they are building high-speed rail, plug-in nuclear reactors, i mean, those are all threats. >> we have one last question for jim albaugh. right over here, if you can get the -- i thought we saw a hand up over here. jim, i can't believe that the president doesn't want to ask you a question. >> i think they asked them all in the earnings call this morning. >> here we go, right down here. >> a question for you about the overall industrial policy for 787. you talk about the overall

moving toward engineering areas offshore where engineers may be more available. back in 2001/2002,/2003, a lot of the resources were being allocated offshore. would you say that's either a symptom of the demographic changes or cause of the demographic changes that are being taken place in the u.s.? >> let me make sure i was very clear on that. when i said that we'll go where the engineers are, we will. you know, clearly we're a u.s. company. you know, having the engineers colocated close to work is important. but in the event we can't hire the engineers in the united states because they're not available, you know, we'll go to where they are. right now we've got a design center in moscow, for instance. we've got some 1200 engineers there. we've got some 400 that code software for us. we've got six r & d centers around the world. and my guess is that we'll continue to take advantage of skilled workers wherever they might be. here we are talking about boeing employees. we're not talking about moving

up the value chain and asking our suppliers who maybe don't have the skills of value chain to do that and i'm talking about boeing employees. >> jim albaugh. you are a star and you're fabulous to be here today. we appreciate it so much. congratulations for the great work and thank you again. [applause] >> and with that, i'm going to ask you to get out of here again. [laughter] >> i hate to do this but if you have not eaten that dessert, you better have a big bite out of it because it's delicious. please be back here at 1:20. [inaudible conversations]

[inaudible conversations] >> so about a 20-minute break of the chamber of commerce aviation conference. about 20 minutes, a panel on the challenges and possibilities of air travel. we'll have live coverage here on c-span2 when it resumes. well, coming up this afternoon at 2:15 eastern, federal reserve chair ben bernanke will hold the first economic outlook news conference. until today the open market committee's report on the

interest rate changes was released in writing. today chairman bernanke will answer reporters questions about it and you'll be able to see live coverage on c-span again at 2:15 eastern. mr. bernanke will speak. our coverage will start at 2:00 pm eastern and afterwards your phone calls. and coming up tonight here on c-span2, booktv prime time at 8:00 eastern "after words" with author susan jacoby. >> if they send me the bill in its present form, i will sign it. okay, any questions? [laughter] >> helen? >> are you still here? >> almost every year the president and journalists meet at the white house correspondence dinner to make a little fun of themselves at

their own expense. president obama will head there again this saturday, watch live or go back and watch a past dinner, search, watch, clip and share online at the c-span video library. every program since 1987. watch what you want, when you want. >> the c-span networks, we provide coverage of politics, public affairs, nonfiction books and american history. it's all available to you on television, radio, online and on social media networking sites. and find our content anytime through c-span's video library. and we take c-span on the road with our digital bus and local content vehicle, bringing our resources to your community. it's washington your way, the c-span networks now available in more than 100 million homes; created by cable, provided as a public service. >> once again we'll resume our live coverage of the chamber of commerce's aviation conference. during this morning's session the chamber -- at the chamber

conference faa administrator randall babbitt talked about air traffic controllers who fell asleep on the job and the new faa bill waiting congressional actions. we'll show you his comments on this break until 1:20 eastern. >> well, take an airplane anywhere in the world. that is our industry. it's a great one. and let's work together to promote it, and we have ed bolen to thank for that quote, and it's so appropriate now to introduce the administrator of the faa. and while he needs no introduction, i would just say that in 1995, that was the year that randy became, after a long-flying career, ending his career as captain at eastern airlines, he then came and in 1995 -- he and i both became presidents at the same time. he became president of alpa and i became president of ata.

and we worked together and it was a great working relationship, and we had many successes because we were able to work together on issues in which we all had agreement. he is the kind of person who is able to bring people together. he's had a great career as i say, as a pilot, as a businessman, as a alpa leader. and so he was the perfect choice to become the administrator of the faa, and i give you randy babbitt, administrator. [applause] >> well, thank you very much, carol. that was a very kind introduction. i appreciate that. good morning to ed and good morning to all the distinguished guests here. this is a great gathering. i'm really happy to be here and, of course, anytime we get this many folks together with aviation as an interest, i know you have other interests, but a lot of you have particular focus

on aviation. a quote came to mind -- carol add good quote but we had a professor, john m. richardson, a professor at american university made an observation. he popularized this phrase. he said when it comes to future there's three kinds of people, those who let it happen, those who make it happen and those who wonder what happened. well, in this room we have the people that make it happen and that's why it makes it so interesting to be here today and to be able to chat with everyone. businesses and entrepreneurs are america's economic engine. they produce the new materials. they produce the new technologies, the new haveaviao to move our country forward. and at the faa we're always working and our number one priority is safety and we also recognize that there is an incredible amount of innovation in the marketplace that we believe will lead us to even

greater safety boundaries and even additional efficiencies. and we certainly want to encourage that at the faa. we want to refine the way that we do business within the faa so that we can certify new aircraft. we can new equipment as expeditiously as possible. obviously, being consistent with our safety mandate, but the last thing we want to be is the choke point in the assembly line of progress and technology. now, at the faa we're in the midst of a complete transformation of the national air space system. we're transforming what we have today step-by-step into the next generation of our national air space system. we're moving towards a system in which air travel will be far more precise. it will be safer. it will be more efficient and of equal importance, it's going to be more environmentally friendly. and so is the rest of the world. we're not alone in this quest. we're working with our partners around the globe to create

uniformed nextgen standards so the goal, of course, is to have seamless transition through the air space even when controlled and that air space is controlled by different countries. a lot of times when people hear the term "nextgen" they think of some far off future of never neverland that we all talk about. but i'm here to tell you nextgen is here today and it's in use and we're continuing to use them. from ground based radar to space based satellite navigation is well underway and we have a lot of companies in this country today that are seeing real savings, fuel savings in particular. and it's of particular importance when you're seeing kerosene and jet fuel priced at barrel prices that are headed towards $140, it appears. nextgen is adding real dollars to the bottom line to a number of carriers and we're happy to be part of that. let me give you a couple of examples here. southwest airlines, for example,

started using gps-based rival procedures originally at 12 airports around the country recently -- well, starting in january. now, they estimate when they go system wide with these types of procedures that they're using, they'll be saving $60 million a year. this is one airline, $60 million a year in fuel savings. but the piece that we all sort of overlooked was very strategic on southwest's part. we all benefit -- we all benefit from fewer delays. we all benefit from lower emissions that they're producing. alaska airlines is joining the faa along with the report of seattle and the boeing company to further develop gps procedures at seattle tacoma international airport and that's part of our greener skies over seattle initiative. now, that project should literally save millions of gallons, not thousands, millions of gallons of fuel annually. it's going to cut noise and it's going to decrease greenhouse gas emissions in the process.

we estimate that the airlines using gps-based arrival systems at sea tack right now. this is not tomorrow. this is right now. they are enjoying a savings today of about $9 million annually. and that number is only going to increase as more airlines equip and that's also based on today's fuel prices, which i think we could all make a forecast that may well rise further. let's put those in other terms we understand. that's money. we do understand that but the current rate of savings produces 34 tons less of carbon dioxide emissions. 34 tons less. that's the equivalent of taking 5,600 cars off the streets of seattle. and these are just by procedural changes. this technology works, and it's being enjoyed by people who are deploying it. in atlanta, delta airlines reports they saved 60 gallons of fuel per flight using the more

efficient procedures we designed. this is where aircraft descend continually all the way to the runway with engines that idle rather than power up on each steps on the way down. i have made the equation -- the difference and this optimize profile descent versus the stepdowns where you power up. it's the difference between walking down the stairs and sliding down the banister. sliding down the banister is not only more efficient; it's more fun. [laughter] >> we want to see this safety and this type of efficiency not just at a few select airports. we want to see this go system wide. this fuel saving can be at any airport that can enjoy these optimal profile descents. we are putting tran receivers across the country. they will allow air traffic controllers to track aircraft very precisely. the aircraft will be using automatic dependent surveillance

broadcasts. sober known as adsb. this type of tracking is already well in use at a variety of places. they certainly use it throughout alaska, the gulf of mexico recently has had full deployment over a year now, places where there was absolutely no radar coverage. today in the gulf of mexico, we have radar coverage that covers 250,000 square miles, the precise ability to track aircraft. i was surprised to learn that every day, every day in the gulf of mexico, we move 10,000 people on and off oil rigs. 10,000 people today navigating safely. those helicopters are saving about 100 pounds of fuel per flight and there's obviously hundreds of flights daily and they are saving 5 to 10 flights daily to go direct today than the old grid navigation we used in the past. we are working with jetblue and

we are equipping their aircraft with adsb and that allows them to equip -- their equipment, airbus 8-320s. it allows them to fly routes down to florida and the caribbean using not unlike hov lanes, special routes that avoid congestion. and so this partnership is going allow them to use the equipment. they will provide us the data that tells us how much, when and where the fuel savings occurred. and hopefully this will encourage others to equip. i feel it will certainly lead jetblue to continue their own expansion and equip the rest of their fleet. it's obviously a trial period, but i think that we're going to have success there and we're certainly going to enjoy getting the data. we very much value these public/private partnerships because several things. number one, they bring immediate benefits to everyone, but they also demonstrate the benefits, the real dollar and fuel-saving

benefits to everybody in the industry. they're quantifiable. they're not forecast. we can show you that it happened, not that it's going to happen. civil aviation in this country is enormous and i think most of you in this room understand what an economic engine it is. it accounts for more than 11.5 million jobs. it accounts for $396 billion in wages in the aviation industry. and these are good jobs. these are jobs americans nationwide -- they have the skills to achieve these jobs and they're proud to perform them. so we're pleased that both the house and the senate have passed reauthorization bills for the faa. it's a very important step for us. we've been living under a number of short-term extensions, 18 for those of you that are counting. it's over 3.5 years we've been operating on extensions. it's very difficult to run an agency when sometimes you're budgeting for weeks, not years.

but we are pleased that both -- both of our houses have moved forward. we need the restoration of predictable long-term funding for aviation programs. i think it's critical to our agency. i think it's critical to the mission. i think it's critical to the safety of the traveling public of the united states. by having reauthorization, we're going to be able to move forward and prove our transportation infrastructure. i think that also leads us to create and generate new jobs and spur economic growth. now, the authorizing funding levels in the house bill are well below what the president had proposed in his budget. and i'm being very candid when i tell you that i'm concerned that funding at these levels would degrade the safe and efficient movement of air traffic as we know it today. i recognize and acknowledge that we're in a very tight budget environment and that means we're going to have to do our homework. we're going to have to prioritize very carefully. we're going to choose very carefully what we can deliver and the technologies and programs that will help us move

and do the best in improving both safety and efficiency, and we'll do that diligently. we already run a very efficient faa today, and i think it's going to be even more efficient tomorrow. we have literally over the last four or five years saved hundreds of millions of dollars in our acquisition costs, our operating structure cost and by strictly reviewing and restructuring projects that are underway when needed. and we'll continue to be careful stewards of the tax dollars that we receive. at a certain point, though, and i want to make this point, a lack of funding will have a very dramatic cost impact on us. i'm afraid that it would cost us more not to implement some of the programs that we talk about going forward and actually proceed with modernization. delaying infrastructure investments means that the long-term cost to the nation, to our passengers, and to our environment will far exceed the cost of going forward with the technology that we have today.

we're at a very pivotal time in the history of aviation. together we're creating a template for a new system. so i look forward to working with all of you completely so that we can continue to operate the safest and the most efficient air transportation in the world. so i want to thank you very much. i think we've got some time -- ed and i are going to chat a little bit but thank you for your attention and we'll continue this dialog sitting. thank you. [applause] >> he'll get mic'd up and while randy is getting mic'd up and let me just remind everybody again we're going to have a policy conversation, but we'd like to give you all an opportunity to participate as well. so feel free to use the index cards that are on your table. there are pencils there as well. write down any of the questions and we'll try to touch on as many of them as possible as we work our way through this conversation. and, randy, let me just start by

saying and acknowledging the purpose of this panel is to talk about next steps for nextgen, but, clearly, there have been a lot written and a lot said about the issue of fatigue in aviation, whether it's pilot fatigue or airplane fatigue or certainly controller fatigue. and i think we'd be remiss in not touching on that. can you just bring us up to speed on some of the steps that have been taken with regard to fatigue and where we are? >> sure. i've noticed there have been a few things written. [laughter] >> i have started more than one set of comments. the press certainly has focused a great deal on this. and i've expressed a little disappointment. i saw in the sunday paper i was recognized for having the worst week in washington. and i was very disappointed. i actually had had the worst three weeks in washington. [laughter] >> so we're fully fully aware of

the situation. you know, it's very unfortunate. we had, you know, the initial incident. and that certainly made me furious, and i expressed my concern. we have started a top to bottom review. interestingly, by our own diligence in going in and looking, we discovered we had had other cases. and so those have -- we have been very transparent, put those to light. we have worked collaboratively with the employees, certainly with the air traffic controllers. interestingly, we had ordered about a year ago, we had jointly agreed to sponsor a fatigue study and we had just gotten the results with that and starting. we'll continue that and we put in some short-term initiatives. one of the things that was pointed out in that report that we could do very quickly was to add an hour to the break between shifts for controllers. we have done that. they have concurred. they've been good partners

through this. this has been a very serious professional embarrassment, i think, to the professionalism in that world and to all of us and we're going to take it on, head on and we've got a number of initiatives we're working on. we're going to work collaboratively with them. we have some obligations with them to be candidly. have we worked enough to combat fatigue. is it okay to say to your supervisor, look, i'm fatigued. i need to step away from here and the answer to that is yes, it is okay. we're working on a number of things to make sure they have the tools. they're earnestly looking to improve their own professionalism and we want to make sure that we're teaching so we're going to completely review what is taught in our academy so that they have a curriculum that's meaningful to them and defines what a professional is and gives them the tools so that they can be even more professional. they can mentor each other and have a better, safer organization for it. >> when you have an event, you

obviously want to handle it promptly. but you also want to handle it thoroughly and well. are you comfortable that much is being done as quickly and i know there are laws and other things that take a lot of time. but you feel like we've had a good balance between the urgency to address the situation and the time to do it thoroughly and well? >> yeah. this is -- i want to emphasize -- i mean, if there was an easy push button solution i would have pushed that button, but this is -- we have done a number of things that we knew in terms of priorities that would bring us an immediate stabilization. we've also started an additional series of steps that will take time. we're going to work -- i mean, we have to, for example, we're looking at our scheduling system and we want to incorporate science into that. science tells us a lot about when you overlap schedules and when you change schedules, what happens. and we're going to work with our

teams including professionals who have, you know, helped us with scientific studies. we've got some experts from nasa, the ntsb has provided us insights as well. we're going to look at all of that and incorporate it but it doesn't happen overnight. we have to have, you know, the negotiations and so forth that some of these things have been agreed to contractually. some actually have regulatory restraints on them so we need to work our way through all of those components so we're well underway. but i want to emphasize, you know, i'm not going to hand you the final document next week and say we're done. we're not. we're also looking very candidly with acknowledgement from the controllers and the professionals that there's some culture changes that need to come about. and those don't happen overnight either. they didn't get here in two weeks. we're not going to fix them in two more weeks. we're going to make huge strides. we're going to work together but it will take time. and the good news is, we're getting a lot of cooperation

with all of the working groups within. and i want to point out, we have a lot of people other than air traffic controllers that work around-the-clock. those radars don't repair themselves magically, nor do the v.o.r. systems nor do all the electronics. we have 12,000 pieces of electronic gear out in the field. there are people who take care of them around-the-clock, monitor them, make sure they're working. they're up all night, too. so we have lots of people and we want to migrate our knowledge of fatigue mitigation across all those lines. >> well, you're a professional -- >> remarks from a morning panel discussion at the u.s. chamber of commerce's annual aviation conference. this afternoon, a panel on the challenges and possibilities of commercial air travel with the heads of jetblue, u.s. airways, fedex express, cessna and airbus. this is live coverage on c-span2. >> and we had to have the right moderator, someone who has a great sense of humor, someone who really knows this business,

and someone who has the respect of everyone. and we came up -- let's see, what's his name? oh, it was allen mccarter. and there just could not be a better person for this than allen. and while i've said that i'm going to do brief introductions, this is brief. allen is, i think, most all of you know the chairman of airbus americas, and he is responsible for airbus activity in the u.s., canada and latin america. but there's so much more to his resume because while that is a full-time job, in his past he was the founder and chairman and ceo of legendary airlines he has been an faa administrator and he wants me to shut him up before i really get him in trouble. but i will tell you the most exciting thing that i have to share is in his bio, and that is the fact that he is, in fact,

not only a highly decorated pilot from the vietnam war, but he also was one of the air force thunderbirds and i think that that aerial demonstration team is the best. [applause] >> so, allen, i turn this whole program with the ceos over to you and we really are excited about what you're going to do and you have one full hour, which is pretty good. >> thank you, carol. my revenge will be swift and merciless. [laughter] >> this has always been, i think, one of the -- one of the neater forums for discussion of aviation issues, and i only wish we could broaden the audience to include more people from the white house and administration and -- other than those of us who are in the rodeo. first, i want to compliment jim albaugh for what i thought was a terrific lunch speech.

one of the more informative and well thoughtout commentary, i think, on our industry and our future and need for education. i think boeing is very fortunate, quite frankly, to have somebody like jim with his experience and his energy and his leadership. carol mentioned that he had been there for 36 years. i'm kind of thinking he might be thinking more about retirement. [laughter] >> never mind. [laughter] >> he's a good friend and very effectiv effective. carol hallett congratulations on being recognized for your contribution on the industry. you'll notice the theme for today is not sustaining aviation. it's advancing aviation.

and jim albaugh mentioned how fast it's going. in the next 10 years we adapt or we certainly fall behind or lose our leadership position. will rogers said that even if you're on the right track, if you just sit there you're going to get run over. so even if we think that our formula for success is right on the button right now, over the next 10 years, it's surely not going to be that way. jim mentioned that we were -- we're facing a $30 billion investment by china in this next 10-year horizon. so i guess if i were to give a speech today, which i'm not, but i would find it hard not to just read the editorial that was in the aviation week space technology magazine april 18th. don't take aviation for granted. i think it's one of the better pieces that showed up in that -- in that magazine. and if you haven't read it, i'd encourage you to do so. it echoes all of our thoughts.

over this next 10 years -- i do have to say it's not all dire stuff. several of you are fortunate enough to be out at the new faa command center facility a couple of weeks ago when it was dedicated. and i can tell you that it is something about which you can justifiably be proud. it's a really first class center. the faa has done a great job there. and it is where -- it used to be -- we used to call it flow control. now it's expanded its mission but it's something, i think, that you can really be proud of and will equip us as a nation for the next 10 years. we've got a panel here that everybody recognizes so i won't introduce them individually 'cause you all know exactly who they are. and i'm going to let each one say a little something and then we'll come back with some questions from both myself and from the floor. and don't hold back. you can ask them anything you want. jack pelton was a little concerned he's surrounded by big

iron guys up here and we can get a chance that much so jack, why don't we just start with you and you can tell us what you're thinking and where we can go for the next 10 years. >> well, certainly we look at growth being up here representing general aviation, one of the keys is the recognition that we all have to work together in today's air space and make sure that our modernization plans when we go forward really accounts for not only the major hubs in the united states but also those over 4,000 other airports that general aviation needs and the other services that it provides when you look at medivact and you look at humanitarian relief and to get to smaller communities it's important the general aviation voices is part of that equation. growth, when we look in the future in the next 10 years, there is going to be tremendous growth in g.a. we've seen the growth in the '07 time frame, and the despair we saw in '08, and '09 but it is coming back and the need and the fundamental business case for

business in general aviation is still there. so it needs to be a part of the equation. it needs to be a seat at the table discussing on the growth going forward. not only domestically but when we talk about the president's mandate on exports, that's another piece of discussion we should have today on the importance of -- if you look at 2010, close to 6 billion -- 5 billion in g.a. exports just in airplanes alone occurred which was about 60% of our total industry business. so it is global market. it is growing. and it does have a bright future but we've all got to make sure we understand how we intergrate in that. >> i want to come back to a couple of those themes you just mentioned but let's give dave a chance to say something. dave, you got dual hats. you got your fedex hat and you got your iota hat and you can speak for both of them. >> first of all, let me just say i agree with what jim said and

we were talking about it at our table today. it's really an inflection point that the aviation industry is at right now so we talk about it at fedex all the time and i'm privileged enough to be the chairman of iota today so i meet with all the airline ceos here in the united states and, of course, all around the world, asia, europe and the middle east and so forth and we talk about these issues all the time. and i'll get to infrastructure in a minute here. but when you start thinking about all the issues facing the aviation industry and where we are today and to advance to the future, the inflection point is right now. and it's on infrastructure because you have the safety above all is the number one mantra at fedex and, of course, it is for every airline in the world and iota statistics said we have the safest year ever in aviation this past year and that's, quite frankly, not good enough. and then you have the security issues and all the issues that we all face on the cargo side, on the passenger side. you have all of those mounting pressures, the mounting issues

and then, of course, the service for our customers and he it end of the day, that's what this is all about. it's the service for our customers. and how it pertains to, of course, the industry issue at heart here is sustainability. so if the customers aren't satisfied, they're not pleased, they're not coming back, it's not easy. the access isn't easy and you've got all the security issues and so forth. sustainability for the aviation industry is really at peril potentially and all of it comes back around to speed into the -- into the marketplace. the access, the speed of the infrastructure, you know, the next generation issues, the euro control issues and all the european control centers and how efficient that is and how easy that is. and you heard jim albaugh -- and we lived in europe for a lot of years and if a lot of people find that aviation is difficult and it's easier to get on their high-speed trains over there, that's a real -- real issue facing the industry. of course, nextgen here and, of

course, the customers -- we sometimes take it for granted either they're shipping their packages or they're flying with the aviation -- the passenger people. at the end of the day, this needs to be faster, more seamless. it has to take care of all the security issues. you have to access the globe more efficiently. so we have a big -- we have big issues facing the aviation industry. personally, in representing aota there's a lot of initiatives moving forward but they're small. they need to be big. they need to be greater and they need to be more sustained around the globe with more harmonization than currently is the case today. i know we'll get back to these issues but from fedex and from my chambership with -- chairmanship with aoto we'll

have that. >> and we have one of the most thoughtful and candid ceos in our industry. doug, do you want to share a couple of thoughts here? >> sure. you said i was candid, i got to think of something candid to say. [laughter] >> look, on what behalf of commercial aviation i've been coming here for a couple years, i have a couple observations because i have respect for carol hallett and i like talking about our industry and commerce in the same sentence which people like to do. it still feels in this town as our industry is a public utility and we're treated as such and not as a business. and that does us all a great disservice. it hurts our employees. it hurts our customers. it certainly hurts our industry and our shareholders. we've made great progress, you know, i feel like i come here and say the same things every year which get frustrating but in reality if you look pack over the last few years,

particularly, as it relates to consolidation, i think the industry has made huge progress by getting from, you know, before the u.s. airways/america west merger there were 13 carriers in the united states which had at least 1% market share in the u.s. alone and 13 carriers and we're down to 7 which is still probably too many and too fragmented but still good progress but the announcement from the department of justice they approved southwest airtran is good news and nice to see. so we're making great progress in that regard. the best way i can evidence that progress is by noting fuel is well over $100 a barrel and while the industry just announced a billion dollars of losses in the first quarter nobody is running around with fire in their hair calling it a crisis. ..

>> that's where i think we are.

>> thank you, doug, and i'm interested some more in your thoughts how the government is helping our industry advance here within the next ten years. get through that candid conversation. one of the key innovators in the industry and has done a good job of differentiating his jetblue product, dave? >> delighted to be on the panel and part of the rodeo day in and day out. i'm delighted to be invited by carol out of republic for her -- respect for her work. i'm going to take a one-topic approach, and that's on a second pay job that i'm honored to have right now, the chair of the nextgen advisory committee. i have been there for two years, and it happened at the end of

the 2010 time frame, and just in the audience today participating in the full day, when you marinade in the discussion through thomas donohue's comments, through the panel, the administrator, jim on the future, and the construction will come up on this panel as well, and i'm of the mind set that this group representing the industry, airlines from all sorts as well as the oems as well as the regulators, labor, i mean, coming at it from all regards that there's plenty of science, and now how do we start to move to implementation, and maybe it's not a home run overnight, but there's a lot of low hanging fruit. how do we move to implementation? with the structure in place by the advisory committee, building off the work of the task force five, margaret jening and rsta

and your great work, i'm really excited alan about the -- allan, and it seems despite the challenges and most recently funding for the faa, that we're potentially the arguments right across and we have to from the standpoint of competition, whether, you know, we can play in the global marketplace and keep that lead in the decade and into the future. i'm excited and honored about that. there's questions along those lines, but that was the theme over the course of the day so far. >> well, hold that thought. it appears through chance or design we're increment tamly progressing with our nextgen technologies. you any we can incrementally attack this and achieve goals or be more bold, and if so, how?

>> we have to be more bold, but i also believe we're in the process of making these incremental improvements, and not just with specific brand decision such as alaska or southwest or whatever the case might be, but i think that the structure that's been put into place, the timing first of all, but the structure around the commission put in place, and now the advisory which is always a challenge; right? because the faa doesn't have to move forward on the recommendations which is frustrating, but that's the rule of the road. in may when we're together in new york for the third commission setting that we've been tasked by the faa regarding equippage by the end of the may time frame and further embellishing on that. dan bolen is here and part of

the process and around the table whether it's mwaa, the airlines, there's this, i think people and the organizations that they represent taking their logos off at the end of the room, and we have to get this done. it's so obvious when you look at the economic impact. you look at the energy savings, and and certainly when we start to see that just this overall environmental upside as well, i think times really, really good. >> i know you're going to get questions probably from the folks about jetblue and about your role in paying for next increase. you talkedded about the importance of export markets to general aviation, and clearly, i think there's a pent up demand. i was just reading this morning for the potential of commercial aviation in china. how do you think you with

penetrate that market? can you be affective in that market as you are in other countries or how do you see the export thing unfolding for you? >> china's pretty interesting market. i spent two weeks over there recently visiting various clusters of aviation. the concern we ought to have domestically is they are either going to replicate what we do and put us out of business in exporting to the country, or we have the opportunity if we get there aggressively and start working with some of the impediments whether it be the taxes, and the air infrastructure that goes on over there to be able to sell into the market and get our brands. we have to take that approach that right now to lead that effort, we can with government support, break down the barriers, and then as the manufacturers here in the u.s. go in and penetrate that country in getting products sold. if you look at what they're

doing over there, over time, which i think as jim mentioned, they have not been successful in representing our products, but they will. it's just a matter of when, and our leading opportunity is to get there first and brands on the ground and get the infrastructure set up. military today owns the air space. that's certainly an impediment, but, you know, we have an economic bottle here that we can share with them that shows that part of the economic development of our country with airport infrastructure, jobs, and manufacturing can certainly be replicated over there. i think we can't go fast enough in really trying to knock down the trade barriers so that we can get in there. >> other and export markets that you see over the next several months? >> it's similar. it has the same impediments, infrastructure not very robust, and pretty large taxation issues around importing into the country. you know, the president's

probably one the few things i agree with him on is the need for increasing our exports, and this is certainly an area if he could get his arms around in breaking barriers, we could make progress very, very quickly. >> after being somewhat -- how should i say this? critical of corporate jet usage, what could the president do to help you and wichita recover and help stimulate the exports you're looking for? >> some of the first steps have been taken. i commend secretary lahood who referred to the fact and dave participated on bringing the aviation to the table to address the environment, address jobs, financing in the next air traffic control system, the implementation of nextgen, and as a result, secretary lahood came out to wichita recently and had fanatics there to show him how important the industry is.

that's just the secretary. what we really need is the president. the president embraced high-speed trains, technology, and environmental causes and has once to talk about the aviation industry. we need to get him to be our advocate and visit the companies that deal with the aviation industry and start to recognize when you look at the overall economy in the country, where we are in the food chain, i mean, the number of high paying jobs, the positive balance of trade we create, and he needs to embrace that and be our big e-cheerleader of the industry if you will. we need that now, not spending time on issues that are slow coming and not having the economic impact that we need today. >> you'll get the support for that in this room a anyway. >> dave, we mentioned operations

and for fed-ex, you are the best bell weather of the economy, and although, and you know, track gdp, but gdp follows what you see in the marketplace globally. what do you see over the next few years? >> well, you're right. we have a pretty good picture of the globe being that we're in 220 countries and we have the commerce and trade going on at the same time, and we were actually looking at this inside fedex the other day, and 30 years ago from 1975 to 2005, gdp grew 150%. global trade grew 350%, and air cargo grew 115%. it keeps driving the global economy, and we see that actually going forward. you know, the same kind of

dynamic growth. china, without question, is leading the charge. india is catching up rapidly. brazil, and really around the world and one of the nings again from fedex's point of view, we sit with the aita and we met on the urgency of the infrastructure and, you know, the fuel crisis and the energy, the carbon foot frippet and so -- footprint and so forth and collectively we don't have a loud enough voice which is ridiculous because we should have a loud voice. we left the meeting and went to there a year ago and talked about the issues we have now, the carbon foot print, energy issue, the oil issue, the infrastructure, the nextgen here in the united states and we came out of the white house and administration showing support for that.

the european and their european control center, and when you stop to think about all the airlines around the world which we got an agreement on to go with ata, iko position pushing the governments around the world in the same direction, that would be very, very helpful and very necessary. now, we have a long way to go, but thing people actually understand the energy savings that we could make. we're venturing into new york and it takes 38 minutes to get in but you could save the carbon footprint and the energy, the efficiency, the customers win, and there's so many wins behind this, it's hards to argue. now even the european government with the european carriers are in support of this global position. we have to do more. we have to keep pressing this agenda here in the united states and all around the world. i think the good news is we have

a collective voice now for maybe the first time ever in the airline industry globally on all these issues so it should bode well for the future. >> okay, we need the president to speak out more forceically and recovering the exports and talked about changes to u.s. policy. doug, do you -- would you rather see the u.s. government simply withdrawal from the battlefield of civil aviation or change their policies or you talked about the 20% tax burden here, can they further help? [laughter] >> that's a loaded question, al. some of this, again, a couple things. first off, we -- our view at least for awhile has been to do no harm which is not the most energizing rallying cry, but just leave us alone, stop please.

that means two things, stop putting new taxes and fees on us which we've been reasonably successful in doing over the last few years simply because we didn't have the money, and two, let us compete, let us do things like other businesses do like form alliances and mergers so we can go out and do things to help ourselves. we've been relatively successful on that, some issues harder than others, but we're getting there. i think we made progress on those points. you want to get to a point where your goal isn't just leave us alone, but rather let's work together to make this better and actually create the kind of commercial aviation system that is best for the country and best for all the people that work in it and use it, but right now, we've been on the defensive mode. i believe with what david just said. you know, some of this, you know, we can complain about it. we have to work within and understand we do a lot of this

ourselves. for a long time we have been self-fragmented and hypercompetitive, we fight each other so much that we don't get a unified voice, and that hurts us and has hurt us, and if you're not together, you know, people drive through the cracks and figure out ways to raise your taxes and things like that, so you'll hear later from nick who is doing a nice job of bringing together the ata, and something we're all excited about. i think we'll do better going forward, but we have a lot of work to do still to get past this, you know, last few years of just leave us alone. we still need that by the way, but to move it forward to a level where we are actually working together and moving forward. >> before we go, questions from the floor, dave, you talked about on the cost side, fuel, labor, of course, fuel is and

labor are the costs, but where's the fracture point in the industry for fuel costs, or are we there already? >> it's interesting. i think my thought on fuel may be contrarian but what used to be a number one cost for fuel 41% of our costs is 35%-45%, depends on the fleet you're flying, but when we looked back a couple of years ago, why is it $147 plus a spread, and then you get into the whole issue of speculation and, you know, the reverse spikes down to the 30s, you know, over $100 a barrel less shortly thereafter, and so what role does the cftc have things like limits and oversight, ect.. that shock, i don't care what business you're in, if your number one cause is tickets or shipping boxes, that's

difficult. more recently, when you look at world events whether it's the middle east or northern africa to some extent in terms of japan, you know, oil at 112 and the crack spread that's now delinked such that, you know, wti and brent, this is what are you taking a look at from the standpoint of a hedging strait ji if you have one; right? some companies have decided nod toot that, but any -- not to do that. i don't think the high cost of oil is a bad thing as long as it's like a governor that disciplines of what kind of capacity should be in the market place, and because we have had a lot of capacity in the marketplace. doug talked about consolidation, and that is the number one issue that drives the ability to sell a ticket. >> others would argue for new airplanes. >> new airplanes, the nextgen engine, and the

winglet as well. [laughter] i'm looking at the audience now, mr. chairman, but we're really excited about all that kind of stuff and more. >> that's the second shot i've taken today. [laughter] let's go to the audience here and carol, i may need help to see hands because we have bright lights. yes, all the way in the back, yes. that's you. right. get a microphone to you. >> a question for the commercial guys. your thoughts on new aircraft development. mr. barger you touched on new engines and the major swings in fuel and limiting volatility in the industry and keeping overall business stability seems to be a top priority, how do you view

incremental changes in aircraft technology versus introducing all new aircraft and the new 777's with fedxe and older 587s and jetblue, and boeing all deciding what they're going to do, so if you guys can talk about how you see that volatility in terms of enter deucing these incremental changes and the risks and benefits there in comparison to actually bringing all new aircraft. >> sure. yeah, great, thanks for the question. i'm sure others will have an opinion. i think from a jetblue perspective we have a young fleet that's five and a half years old, and we're having meetings today on how do we modernize the fleet from the stand point of what's happening with the power j plant. doug's comment about just the work of the ata and nick's leadership and dave now working with the change to tony.

and by the way, the oems have done a great job of driving fuel efficiencies into airlines already, and it's mainly the powerplant, but the airframes do a lot of great work. when you look at the next generation specific to the neo as you mentioned, i mean, it's hard to the to be interested in something that looks like a 15% fuel burn efficiency and something that could be out there in 2016 or so, and especially nobody's going to try to predict where the cost of oil goes, but within jetblue, we don't think it's going to be a lot lower as we look at the future, and so we're excited about it. there's meaningful meetings taking place with the manufacturers today to even drive a younger fleet from what we're doing today. it comes right back to nextgen, but i'll wait for a question on that because you hate to give it all back when we

have the technology to drive the savings today. >> i'll jump in and talk about our 777s at fedxe. -- fedex. do you want me to go there, allan? [laughter] >> i already took a shot from barger. >> back to the 777s -- they are much better fuel efficient, 18%-20% better. they have a better payload. you can leave now out of any point in asia, hong kong, shanghai, you name it, singapore, and you can pick up, at least for us, two to two and a half hours later and fly into the hubs all around the world so you can fly out and two and a

half hours later the customers are sitting there manufacturing, and no fuel pit stop or a payload constraint. these plaps are fantastic for us, better fuel efficiency and placing the 711's and triple motors and high cost, so you can see how that all helps, and another thing that helps, and i want this point in there and we've met with the administration several times and actually they passed it last year. the accelerated depreciation on the assets helps your cash flow to reinvest in new technology, keep the jobs going and push that agenda for because it's a sleeve off the government quite frankly and you'll see more technology and new technology and keep pushing into the new areas to help the customers at the end of the day and helps the

companies so there's a win-win here, and it's a win for the administration. >> just one comment from a business aviation standpoint. all of the member companies of the general aviation manufacture's association have signed up to the same carbon footprint reductions as the airlines have over the next 5-10 years. in order to do that we have to design airplanes that are far more efficient than today and requires the manufacturers to support that. when you look at the science behind it, it requires that the operational environment changes to meet the goals which gets back into why the importance of the nextgen is so important to get the gains. as gym albaugh mentioned at lunch, we need the tax credits put in place to encourage the investment to allow that innovation to happen. we're not spending like boeing, but $253 million a year on

research and development alone, we can't sustain that without the tax credits in place. >> you need to get some subsidies. [laughter] >> you know, he asked about incremental research and development, developments and new programs, but we got an oversight agency that's now basically declared because of the budget pressures they can't travel or accept new certification programs. ..

>> and making sure every stress equation is correct, we could help make that budget required. we can get information significantly faster but at the end of the day, for us, the argument is safety. there is no one who is more concerned about safety than the manufacture. we get sued. the f.a.a. does not. we're going to make sure our standard is held to even have the what the requirements and regulations are. >> one point i want to make i think as well that to a lot of the infrastructure comments i've heard earlier in the day, as it relates to new aircraft, my view at least, anyway, i think it is right, is that the u.s. domestic industry is mature, and the reality is with some exceptions, as you talk to people that are

planning and buying airplanes, looking to grow, we don't see a lot of growth domestically. as a result when you ask about airplanes, as an industry, i think the answer to the manufactures is we have enough airplanes. we don't need more airplanes flying around the united states. i'm speaking about the widebody is a completely different issue. but the narrowbody place in the united states there's enough of them. we don't need more. give is one that can do better than the ones we have and we are all in. we don't need any more of them. the point i think is really important as we talk about airports infrastructure and things like that as well. there is a lot of, i think those of us who are looking at the future from our perspective, from the business side, have a different view of what the industry would look like over the next 10 years than the f.a.a., for example. that's causing anxiety, or a lot

of attention. i struggle for the right word, but debate probably is a better word between what we will need over the next 10 years between those of us who are out there flying airplanes versus those who are in charge of building some of the infrastructure. >> good point. we have a question over here. >> you guys have been sort of on different sides of the fence figure clearly a big fan, they've come of nextgen. duh, you may quite as enthusiastic about it i think he said harder because of the domestic system. and i don't know if you are all here for the earlier presentation about the public-private partnership and the innovative ways of financing. just anybody's opinion, and, obviously, including jackson's you head of the finance side of fac, what are your views about

the proposal, that's not the way to do it. the airlines have lost a ton of money. what is the right way to incentivize equip each for nextgen? >> let me start. you characterize me as not being a big fan of nextgen which is not true. i am indeed a huge fan of nextgen. just not a huge fan of paying for it. [laughter] so, and look, i'm not trying to get something free. i'm also, as i think all of us are, happy and willing to pay for the benefits we receive. and would like to do so. nextgen has huge ramifications for the industry had huge cost savings to the industry. it saves a lot of time for customers, allows us to save fuel. greatly in favor of. it's just the price tag, and looks awfully high for those benefits.

and, indeed, in excess of the benefits in aggregate. i'm with david. david can say is better than i can but i believe there are ways where you can get the benefit and certainly most of the bennett's for much less than the total price tag. and certainly start getting them in sooner. i'd like to see it face in the way we sussing benefits before the cash goes out. but the wrong answer to this is but more taxes and fees on the airlines to pay for nextgen. that doesn't make any sense. it's going to cripple us. i heard randy this morning make the point that its $8 billion, and when it is all done it will pay for itself in two years but i would love to see those numbers but i will take him on his work that's what it will save when we get done. i think the problem with that statement is when it's all up -- i don't how long it takes for you to get spent but we are 10% of the industry at u.s. airways. i don't have $800 billion to go give for this project so we can

get paid off sometime even over a two-year period, five years from now. that's not a project. there are all sorts of benefits to others. that should be paying. that's my only exception to the program. and has nothing to do with the program. is a fantastic program. we can't afford it. certainly can't afford to burden even with, through debt, burden of the balance sheets of this industry furthermore by paying for it with the debt. went to find a better way to do this. we've will gladly pay our way for the benefits we get. but we can't pay in advance. >> do you guys agree that is equip each sort of a long pole antenna for both airlines and general aviation? is that the problems that need salt, the other things manageable, technologies and implementation? >> i will start on the. i think, i was at the presentation with a debate with russ and dave and mary in

leading the battle over the course of a. i think it's been a long pole into. is the first task the committee, i think i called a commission earlier. we will have a commission if the committee is not successful acting. it's been around for so long, but the first task that we have is really equippage and it's like who. and then what are some of the ways that maybe to incentivize the equippage. he started into what it is airlines and alpa, corporate, business, department of defense. it's been interesting to be. i do think allan that is a long pole. i think there's some good work that is taking place within the committee. the subcommittee and work groups that have been put into place, with experts in each of those areas. i think to be some real solid recommendations that michael and f.a.a. are going to have to really wrestle with. i think they will be very, very

thoughtful about moving this forward. geography so metroplex is, in terms of the where and also when you take a look at, i think this is important, performance metrics. because that's kind of what come at the end of the day what we are investing in and how you take it to whatever board, what are you going to get for a? that's what truly important in terms of the benefits, if you will. again, i'm incredibly optimist optimistic. >> yes, you are. [laughter] >> let's get another question here. he we go. >> yes. doug, what's the next merger, airline merger? and then i'll ask you and dave and the others, should the limit on foreign ownership of u.s. carriers be eliminated?

>> the second one is for david. all, they are both for me? sorry. i don't know. david perry doesn't want to merge with me. [laughter] so you can strike that went off the list. i don't know, ed. we made a lot of progress on that point it is probably still more to come. but it doesn't have to happen. as someone who has been a large proponent of consolidation for longtime i'm happy to where we've gotten. we are naturally point where we have four large hub and spoke airlines, and to nationwide airlines between southwest and jetblue. that's a relatively rational industry, much more rational than it was before. could it be three and one? sure. going from 42, three to one is nothing like going from where we were which was something like seven and five.

or seven and six, down to four into. so at any rate, we have done those of what needs to be done. will do the others? maybe. it becomes more tactical from an industry perspective and a large strategic issue. you raise a good point, however. globalization, all that we talk to these numbers, the u.s. industry. for a business that connects the globe better than most other businesses. we still have these large barriers to globalization. and those i think over time will have to come down, and will come down. but i think we are a ways away. our focus right getting the u.s. industry where we work and where our people work ration allies. i think we made a lot of progress, but that's the next phase and the next wave. it will happen one day. i don't think it's going to happen soon. for whatever reason, concerns amongst labor about what might

happen if those foreign ownership laws are taken away. and i think that will stop anything from happening, certainly for a while. but i think it will happen one day. right now we are doing it to alliances and we're doing it to antitrust injured across the atlanta. as those get stronger and stronger you'll see things start to look more like a global business. and that eventually you see just like what's happened in other businesses, this fear factor that if we break down these laws to global commerce, go away. you will see the fear factor go away as we get more accountable with. that's what's driving it now, these concerns of the unknown. that are still out there and we have to do with for a while. >> i would echo what doug, i think you're a big issue sitting in front of those issues. you have trade barriers. at the open skies issues. you have brazil and saudi arabia

if you have these markets around the world. these markets that all connects, and it is a global industry like doug said. so you have all these forces pushing him. so i think there's a lot of work yet to be done and a lot of priorities that are ahead of that issue, quite frankly, in my opinion. >> i would love to jump in on the. by the way, with consolidation that's one reason why we believe there is a need for more airplanes. and for different models. and i mean, although in our network today with 25% of our seamounts are in international markets and the commonwealth to puerto rico, we are moving our footprint differently but we think they are providing opportunities for growth as the industry is also consolidating in terms of brand. i think it's an international or globalization and foreign investment. i'd like to think that there's a reason reason why kill had them and jetblue table together. i appreciate that.

that has been so good for our company. when we take a look at foreign investment and knocking down these barriers, i'm of the opinion if they keep doing this it will come down sooner rather than later because it will have to. but we'll see what happens into the future. last thought. i grew up in detroit, watched the otto industry. they need to look at this dea te steel industry. there's an awful lot that is holding us back because of the regulations that we have in terms of investment that is taking place but i think this would be very good for the companies, the employees, the crew members. and serving their customers and shareholders long-term. >> i think you know my feeling is that any governance issue that was developed over 50 years ago needs to either be re-examined or -- on its face spent i am from atlas air.

you talked about the inflection point we're at today, some of the panel. many of us remember the civil reserve air fleet. you talked about the need for presidential policy. allen, you know in three other inflection points in our history, 50, harry truman, 62, john kennedy. and in the last one was 87 with ronald reagan. we create what we called the national air lift policy. it was and in sdt 280 just to have a number, but for fedex and u.s. air you guys are all artistic that's in the craft. but for allen, might we not be at that inflection point again where power of the ceos on the stage could get together and convinced the president like we've talked about today, will reaffirm not just the national policy but a national policy that we can get behind. your comments. >> i think he asked you. a question to the moderator. >> i would do anything to have a national aviation policy, well

thought out and adopted. if we could engage our policymakers and the government to think about that. it was mentioned earlier, jim albaugh mentioned it, some of us has mentioned it as well, the percentage of gdp depends upon the aviation system is just staggering, and we should protect that as a national resource. .org attack it but developed it. and we are not doing it yet. just not doing it. >> let me jump in. bill clinton of course, wonderful ceo, a number of us went over to the administration, and secretary lahood a month or two ago, civil reserve air fleet. so many others. of course, we have so many military pilots, thankfully, and they do their silver reserve duties. and to have numbers of craft.

so we have a lot at stake as a country and as a company, and collectively. you are right. we need to probably form a more of a cohesive understanding of what that means. i'm not going to get into a big political debate here, but the flight duty time for issue is a big problem for you at atlas. is a problem for me. when we have at a moments notice you have to fly these military flights, we've been making our points and people have been listening, but they need to understand the full complexities of what we're talking about here. so it's a very good point. >> i would also add when you talk of policy, i'm not sure what the element of that policy would be, but certainly this is a problem what doug and i are in disagreement and. it can do and as more regulation. it needs to get back to the faa's original credo was, they were to promote aviation. we need government. our policy to promote aviation

board so that regulates it. >> another question? who we are. we are. >> the theme of the conference, you know, centered around nextgen and we heard some really good ideas and thoughts about how that's going to decrease the carbon footprint and be more economical for us. and yet, today we are subject to a little thing called etf's. for those who don't know that acronym, it's environmental trading scheme in europe. so for the panelists who are

impacted by that, i'm interested in hearing your view on ets and whether or not the federal government, our federal government, has been helpful in that regard. >> i would jump in. and that was one of the big issues that we addressed in this whole issue of the environment of issues where europe was jumping out of ahead of the rest of the world. and very harmfully so. we had the european carriers allowing the agency to put it in the rest of the world. we have collectively banded together in whidbey meeting with with the governments in europe. to try and have it become more thoughtful and more logical rather than just tax imposing and destroy the aviation industry, quite frankly substantially. we met with the u.s. government. they understand it. nancy will be on next. she's been leading that effort over in denmark and copenhagen

meetings. so it is a big issue. you have to watch it all the time that it was a big victory for us to get the european carriers collectively with all the rest of us in one common voice. >> i'd like to just put a little rap on this here before carol gets the hook on of the i thank you for all your comments and your attention. over the next 10 years, our industry will be shaped by leaders such as the four guys up here on the podium in front of you. i don't think there's anyone i respect more than afford you and what you do for our industry, and it's your creativity and innovation that will get us through, going to advance aviation over the next 10 years. i thank you for your participation today. thank you very much. [applause] >> i just want you all -- don't leave.

there's lots more to go. but i want you to take a look at not only the front cover but also the slide out. no, because that is as was pointed out before, that is a cessna jet that is in the centerfold. but it is surrounded by commercial aircraft on the ground. that's what this is all about, is team effort. and you saw that in this terrific panel, dave, thank you so much. appreciate it. thank you. doug, thank you. >> the mustang is going to be raffled by jack this afternoon. i wish. i would break the chain growth and put my card again for the. all right, we're going to ask the next panel to please come forward, and after this panel there will be a 20 minute break. so please try to stay in your

seats. we are looking -- we are looking for our moderator. [inaudible conversations] [inaudible conversations] all right. what a getting hooked up will try to keep your attention because i'm going to introduce darryl jenkins, our moderator. this is really a very important panel that we have coming up. and for all of you who are leaving, don't forget, you can't

win any of the tickets if you don't come back. so, with that admonition, i am very pleased to be able to introduce a longtime friend, and a fellow farmer, and that is something very important that darryl jenkins and i have in common. but there'll has been an independent consultant to the aviation industry. for about 30 years i think. more or less. and he has words with a majority of the world's top 50 airlines. in addition to having been the former director of the ohio state university airline operations center, and he also has a hand to vote on airline economics. his background is steeped with aviation, and i know you'll enjoy reading his bio in today's

program. but i'd like it now to turn the panel over the darryl and i think a lot of what our last panel said will come to fruition here in this panel. so darryl, it is all yours. >> what a pleasure to be here today. i always appreciate the opportunity that comes -- to come to the city once a year. i am a passion i really enjoyed the last panel. i am looking for to this one and our conversation. i'm happy to announce that four of the five people of your ask we know what they're talking about. i'm going to spend -- okay, i don't. you all know that. we have billy joe. thank you for showing how to pronounce your name. nancy and the young man on the and is an undersecretary of the department of agriculture. all of the bios are included in the. i think we'll start with some opening statements.

we have a slide that is up that i want you to start cruising right now. and i think we'll start with her undersecretary here and then go with nancy. >> iq very much. i appreciate the chance to spend a few minutes with you all today. the department of agriculture, we're very excited about the potential of biofuels of course and what it means for rural america, particularly excited about the challenges presented to us in trying to me that opportunity. i want to thank particularly the ata and bowling for their join in with an agreement with us, to work closer with and the rest of the industry. trying to develop the basic feedstocks and the process of creating a biofuel source for you all for your airlines. so look for to the rest of the panel. >> tank. nancy? >> i think there's no question that aviation is a green engine of the economy. i think jim albaugh really captured that and painted a picture without may be saying it

quite that way. in his remarks. 2% of the world view that we drive four to five times that amount of the global gdp depending on whether you include all direct and indirect. that's a pretty remarkable record. 110% fuel efficiency from the u.s. improvement from u.s. airlines, 1978. so what, that's like taking 19 million cars off the road each year since 1978. so, we've got a great record. but what we're looking at now is not just the past but it's the future. we see aviation alternative fuels as a big part of our future. you heard the last panel, mr. bronczek in particular, talking about a worldwide aviation commitment to fuel efficiency and carbon neutral growth from 2020, and they need to push measures, technology, operations

and infrastructure to get there. and alternative fuels as the slide shows you is one of the pieces of that package. i think carol really hit the right thing overall for the conference. aviation alternative fuel really is a global partnership and i think will get a chance to talk about that today, that we wouldn't be where we are with our partners at the usda, for example. isn't it cool to have undersecretary from usda at an aviation conference? and the military, the manufacturers, the airports were all in this together. so i'm looking forward to further dialogue about all the things we're doing to make this a reality. >> thanks. >> first of all, i have to think the u.s. chamber of commerce for inviting german representative to this conference. and i think we cannot talk about biofuel without talking about boeing because boeing is being selected for many, many years and moving this subject of

biofuels forward, that we, 50 years of cooperation last year, and now 51 years already, we are very much impressed about the leadership that boeing is taken on a worldwide basis. not talk about domestic or u.s.a. only but on a worldwide basis to believe attract airlines, to step into the subject, and as a follower of this track, i can say we in europe, we are operating a company that's basically operated by boeing manager who is talking to us every day. so i must say to a certain extent that i love it to say, europe is being ruled from seattle. >> thank you for the kind words. >> let me put this in your head as you are with us on this

panel. about five years ago, biofuels will not work in jet airplanes. it won't be -- it will meet technical standards, they can't make enough. et cetera, et cetera. by three years ago we have proven it was possible. but probably unlikely. you can do it technically but too many open questions. today we are really on the verge of commercial availability starting. it's the beginning of a long road, but we have made such tremendous progress in this area, like the slideshow, it's one of the tools that is essential to address not only our carbon footprint in the future, but as i'm sure darryl will remind us, our economic future. >> let me just say in line with that, i think that the issue of

jet fuel is the biggest issue facing us today. that an nextgen pretty much sums up everything we are worried about in the business right now. i think all of the decisions that we will make in the next 10 to 20 years in the airline industry, which cities we fly to a what type of an airplane we fly them in, what we're able to pay our labor and so on will be driven by the price of jet fuel. so with that as my introduction let's go back to the u.s. the and ask the nice question, why is the usda here on an aviation pelted a? >> my mission is will develop and. i come from pro-america. i spent four years as a farmer myself. the opportunity of this is enormous. will america goes through its ups and downs. in the 1980s we had a real farm crisis that really collapsed dramatically. there was tremendous bankruptcies. so we find ourselves constantly looking for the next opportunity. trade has been very good to us in recent times.

the exchange rate has been positive for ourselves but that can change. and so we tend to constantly look for the next opportunity. agriculture is extremely mature industry in the united states. we have enormous capacitor we are the best agricultural production in the world. so we think systematically we can grow our capacity and grow into biofuels world as well as to continue to provide food. so we have to build the basics, look at the basics and we have to look at our market growth. we have to look at the capital necessary for the production of the systems necessary for production. ..

>> so we're in those stages of exploration, and i think much of the biofuel world is in the same place, what's the best opportunity, best technology, and what makes the most sense. it's been nice to work with many here on the processes to get there. >> nancy? >> yeah, if i could add to that, i think what we see is as billy said is we know how to do alternative fuels and we have a speck that allows for alternative fuels and now how to fly them and there's a lot of flight demonstrations, ect.. what the real challenge now is commercial scale up, and the

partnership that we have with usda i think is this tremendous opportunity. it's about 85% of the cost of alternative fuels is the feed stock, and how do we drive that cost down? how do we make that cost effective in a way that is home grown dressing really the -- addressing really the need for more energy independence in this country, and, you know, we started a little bit with the environmental goals that we have, but the airlines as you heard dave barger and others say , we have a volatile energy supply and cost, so if we have a competitor to petroleum based home grown base, that would be great. the keys are at usda. they know how to work with the community that can deliver the feed stock to us, and it's really this fly initiative that

we have forged and it's great because it serves rural america, serves the farmers, serves the economy, energy independence, and it serves the airlines and aviation community. >> i'm going to suppress the tendency to ask. i have 100 acres fowl next to me, but i'm not going to ask that. [laughter] let's go away from the united states for a minutement the european view point and bring joe in on this. >> well, compared to the u.s., europe is a little more complicated as you may imagine. firstly, you have one government with a road map for biofuels, and in europe we have more than 40 countries with more than 40 different governments speaking 20 different languages, and i would guess that all of the roughly 400 million europeans more or less 200 million are not

speaking the english language, so finding a compromise that leads to a road map for biofuels is much more complicated than here in the u.s., and therefore, we, of course, appreciate the leadership that the u.s. has taken so far and many models just indicated by nancy and the secretary will be copied further or later in europe as well maybe with some differentiations, but the basic model can be seen here and as you mentioned i've learned in my business that the u.s. wheat production from 1950 to now improved by more than 400%. i mean, this is impressive and showing that it really starts with agriculture, and if we don't get agriculture sector which is totally away from our aviation business, if we don't get agriculture integrated into

this supply chain, we won't do it. again, i think the basic model can be seen here in the u.s. and hopefully we can copy it no europe to some extent. >> what about the technologies used and which are commercially available and what's the time frame on this? >> yeah, we have one processes taj and it's fully approved. we have another process approach which relies on flat oils, oil seeds or algae oil, and that will be approved this year, and then we have a third pathway that's just starting the approval process taking all types of alcohols derived from things like corn for instance and turn those into full hydrocarbon jet fuels so lots of different pathways coming around

very quickly, and we need a variety of feed stocks. we need a variety of processing methods and scales, small, medium, large scale of high processing arrangements and to get a port portfolio that can be stable and provide a good supply. >> does that have to do with the geographic differences in what you can and cannot grow? >> it's driven by policy decisions and what works under u.s. policy will probably be a little bit different than what works under european policy or policy in china, okay? so we need all of those things to address this need. >> do we have the ability to distribute this and to take it to a plane on a runway? >> yes. >> well, tell us about that. >> sorry. >> let's get down to the facts. next thing i'll ask you all is

prizing. >> we'll start with the easier question which is do we know how to get it? really, i think the vision of the aviation industry and it goes back to the commercial aviation alternatives fuel initiative that ata and boeing and faa and airports and manufacturers started in 2006 and our vision has been that we have to have drop-in fuels, and it's the term billy used to make that more provide. the fuel needs to look at the same as pee droll -- petroleum based fuel and you need to put it in today's jets and the like. you heard the infrastructure challenges; right? we're not going to create a whole new pipeline system or create jets that fly one kind of fuel and jets that fly another. drop-in fuel is the way to go, and we can use through the jet fuel specification approvals, the pipeline, the storage at the airports and the like, and

really the image that billy gave you of different options around the world to think about this. we're not 30,000 gas stations around the country. we're, you know, take 30 airports, 40 airports, and you have 80%-90% of the supply. you can imagine regional distribution in the airports using the infrastructure we already have. >> what are the technical problems? do we have 100% biofuels or 90% real gas and 10% ethanol? how will we actually physically handle this? >> jet fuel is made from paraffins and other stuff we don't want, okay, so we're not going to make the other stuff. we don't need that. we make paraffins. paraffins can be made from just through modern chemistry to use the term today, several

methods. aeromatics are at large scale and can be done shortly, so we'll be able to make the whole thing, everything we need. in the meantime though, you can take the paraffins that are produced from plants and mix that with petroleum based fuel and get the aeromatics you need for the essential part of the equation. today, we can go up to -- with the ft process, we can go up to almost 100% with the aeromatic, and president plants it's 50% with the pot oil or oil seed processing. we're starting at 50% just to kind of ease our way into this. we know there's not enough supply to go 100% anyway. we'll step through itment technical barriers are the

easiest part of this. >> joe, are there problems from united states to europe and filling your planes up? >> no, actually there won't be problems in future as we have set the specification and therefore as we work perfectly with jet-5 for 60s year, there's no problem coming up, but answering the question with regard to practice, so i'll take a chance to come to that subject. [laughter] it's the first question ever raised. very carefully. i mean, finally it's the passenger that has to pay, and there are two sides of the coin, and i think we have to somehow communicate. on the one hand side, we cannot create industry for fuel losing the attractiveness of our business model and having the negative response if our passengers. i think this is practicing suicide and nobody's going to do

that. on the other hand, we know that we have to do something to mitigate climate change, and the longer we are waiting to do this, the higher the cost will be to really get rid of the fuel too. therefore, it's a story where no easy answers can be given, and therefore i think all of us, we are still on the way to search what is the right solution, and the right solution as already indicated by billy is really to look into the regional opportunities to see what is the best solution, frankly spoken, for each effort, and therefore, it depends the solution for chicago located next to the midwest may be totally different to a solution in singapore, but therefore finally the passenger has to accept what we are doing makes sense. it's affordable for us.

it's forbe for -- affordable for them. >> nancy? >> i would add to that. when you think about stainability, you think, okay, back to the environment. sustainability is not just about the environment, but the balancing of environment good, economic good, and social good so alternative fuels have to be cost competitive and so what we have to do then is drive the costs down, and i think really the undersecretary holds some of those keys because we're doing business case analysis right now with the military, and weaver getting -- we're getting close to getting the fueling commercially viable, but we need a few large scale jet fuel processing facilities up and running to demonstrate that to the market. you have users who want to buy it. joe wants to buy it. our airlines want to buy it, but

we have to show it can be done. i think some of the programs that usda has whether it's biofuel refinery programs or programs to help make feed stocks, oil feed stocks more attractive to the farmer, crop insurance for the types of energy crops that are relevant to us. those are the types of things that help with that challenge. >> what do we do? what do we plant next year? >> what do we plant next year? the thing that makes the most unsuppose. [laughter] well, there's a little humor to than. there's a good point for sure. i want to suggest how we alined the parties and interests involved, and we allowed the producers to actually become investors in the corn and ethanol plants because we had so many variables here that it makes people anxious. crop prices go up and down, the

variables, the exchange rates that cause dramatic effects on the market, but what i'm suggesting is as we look at this, we look at a as a complete set of circumstances and look at everybody's interests to make sure they are aligned. the producers owned part of the industry and they always had a supply. there wasn't as much need to go out and compete for the product because the producers looked at it as an opportunity to market their product as a higher value. what i'm suggesting is we build this system as we work together. we look for those needs, those interests that have to be met in order to accomplish it. the next part of this is capital, finding enough capital. right now the credit industry is so anxious. they just are not taking risk, especially related to rural areas to any degree at this point so finding ways to mitigate that risk and bring confidence back to that will be

critical. what we plant next year is probably corn, soy beans. [laughter] it depends on where you are from. >> let's talk about the price mechanism about this and where it comes from. how will the pricing of this be done, billy? >> well, it's going to be ultimately it's going to be price competitively with the alternative fuel. the fuel we know today is traditional fuel so petroleum prices drive the price of the alternative fuel as well. >> so our substitute fuels will be in fact priced high in accordance of what petroleum is? >> i think we have to be realistic. we're seeking cost competitiveness. i think to expect them to be cheaper would be too much, but perhaps if you have a competitor of petroleum-based fuel, you have something that helps with the volatility and ultimately a competitor, we would hope, makes

fuel prices more stable and eventually comes down over time. >> one other thing, we passed over joe's comment about the productivity of wheat over the past 30 years. nearly all of the feed stocks we're talking about here are undeveloped at this point. they are at the very beginning of the curve as well as the processing at the beginning of the improvement curve so that's -- if any logic applies here, costs will come down dramatically of. they already have in the last five years, and as costs come down, that doesn't necessarily mean that price is going to come down, at least at first. somebody's going to make money on the difference, and there might be some people in the room who want to be a part of that. you can't do that today with an integrated oil company. they are too big, too powerful,

they are too fully invested. this is a new start. it's a new opportunity potentially. >> okay. this is an issue that i'm struggling with in my mind. we make it a little bang for the buck -- have i said this correctly in terms of economics? >> i think that's the wrong question actually. i mean, what the airlines are seeking in alternative fuel is a competitor to petroleum-based fuel. why? we have benefits to add to the package of measures we're pursuing, and we think we can bring some stability to the commodities market essentially the petroleum market, and that will help. if we can even deal with taking down some of those peaks, that would be helpful. i think overall, over time, we are going to get more cost effective fuels through alternative fuels, but in the early days it's essentially the

same price and petroleum on a commodity market. >> go ahead, joe? >> there's a clear indicater once we have done a good job. when the american farmer starts to become the shareholder in an airline, then we know we have reached the right level. [laughter] but nevertheless a very valued point is investments, and so far i think our experience as of today is that the major oil panes have not invested money into their business to that extent necessary to really get the market forward. they have done a lot of investments in research, of course, and we have estimated just a time what would be the necessary investment if we were just to change 6% of our present fuel demand into biofuels and the preup vestment in -- investment in land cultivation is $6 million u.s. dollars and the same on oil refineries and

that leads to $13 billion u.s. dollars, and that's the figure we have in the books of boeing. therefore, we cannot simply afford these kind of investments, and therefore, we need to have third parties to jump in whether it's from the oil companies or whether it's from the investment sector. regardless, we need the investments in order to really get these things running. >> you had a comment, i believe. >> i do. i think there should be and needs to be a return on up vestment on these investments, and compass exactly -- that's exactly how we approached ethanol. our approaches were successful and as a farmer it was a natural hedge for us. we made more money from ethanol is the price of corn was down and if the price was up, we still made money. it was a question of yes, it was an economic opportunity.

i think that opportunity can exist here as well in a lot of dependences, and people shouldn't look at it as social investing. it's economic investing. it happens to be good for all the parties because it creating an opportunity -- you know the alignment of the interests necessary to do this is important. it's an understanding and meeting the needs of everybody involved. agriculture is having a very good time at the moment here, but we in agriculture know that today's shortages can be tomorrow's surpluses, and so we tend to think in a longer term. we tend to think in cycles, and my hope is as we build the industries, the interest will wind and we'll see the economic value for all of us in the long term. >> can the apa form buying co-ops, form something to formulate the price, be the price setter somehow? >> as an attorney i'm careful of antitrust and price fixing and all of those things, but what

we're doing is bringing the airlines together with the fuel providers, and through the commercial aviation alternative fuels initiative, we have a business team, and that's co-led by american airlines right now and ata, and we have brought groups of airlines together with suppliers because one of the ways that we're going to address some of these price issues is to share risk, and getting into joint buying contracts is one way to do that, looking at long-term buying contracts, another thing we support for the military is to extend their contracting authority to be longer term so that we can do joint purchasing with them. >> how far can you push that in terms of long term? >> well, it depends on the deal, absolutely, and the fuel buyers for the airlines are directly involved in this. we're looking at 5-10 year off take contracts, and there's sharing of risk in there if you do that. some upside and downside to both parties if you're locking in for

that amount of time. one of the companies has been in these discussions with our guys, and we've entered in already to a couple of prepurchase contracts with a couple suppliers and turning them into agreements is the next step, and that relates a lot to driving the commercial terms. >> okay, this is washington. let's talk policy on this, bill di. you're a washington pro. what are the policy issues here in terms of alternative fuels in the aviation industry? >> there's policy issues relative to agriculture treatment. there's a lot of things that can be addressed to make it more palatable for a producer or farmer to decide on an energy crop as part of their farming portfolio, thing like crop insurance were mentioned. there were probably a bigger

policy that came up in a couple ways earlier today around energy, and that is how important is aviation to our economy? is it okay if fuel goes to uses that tend to make aviation fuel harder and harder to get? ie -- more and more expensive because that's what's happening today. there's the premium put on jet fuel opposed to the base price of a barrel of oil, and i think that our industry particularly need to drive some energy policy decisions around, you know, for cars, there's lots of other ways to produce that energy. for electricity, there's other ways to produce that energy. for airplanes, the big jet airplanes, this is it. we need essentially jet a to

operate. we need energy policies that recognize that and balance that out. right now, a refinder and get more for a gallon of diesel than for a gallon of jet fuel, but it's cheaper to produce the jet fuel, and so there's something wrong. >> so -- >> so i think we need to put the priority on getting initial projects in place to let the technology mature to where it brings up the cost structure, the availability, those kinds of things are what i'm talking about to help stimulate the investment. >> now, in the prediscussion we talked about that and i think nancy or you or somebody brought it up the price of alternatives

are becoming almost economic, but that's because of the price of jet fuel being so high right now. are we making advances in terms of technology in doing this that is bringing the cost of the alternatives down, or is it just the fact the cost of the primary product is blasted so high that the other ones are becoming more economic now? >> both. >> it's both. price of petroleum is going up, especially -- problem is you can't invest, you know, in a new biorefinery based on the price of oil in the last month or the last quarter. you need a long term track record, and as long as it's volatile like that, there's no new investment in alternative capital. >> the volatility is the issue? nancy? >> great technology breakthroughs have a higher cost in the gipping, and billy

mentioned this, but it holds true in energy. if you look at solar, nuclear, it starts high, but over years of development, it really comes down. that's what we've seen in the last three to five years working in earnest or alternative aviation fuels is technology is coming along, but really i think what we're talking about is really the supply chain which is how do you get the farmer to grow it? how do you connect it with transportation to a processer? how do you refine it and get the to the airport? some of the case studies are aimed at just that from the beginning to the end, and bill and boeing helped work with alaska airlines and others in the pacific northwest to lead one of those initial studies showing great promise for how you have to connect all those logistics to make them price

competitive. >> the process is simple and in northern virginia the opportunity cost is what we get per day, all right? if you offer me a price higher than the cost of what i can go for planting hay or straw, we're in good shape. long term. >> i love your example. our contracts are a lot closer -- our contracts are looking more sophisticated than that, and i think we're not -- under secretary mentioned cattelina that can be grown in rotation with wheat. we're working on projects based on that, but what happens if the market fails that year? there has to be another commodity to take its place. while i'd like to focus what you can do, what we're really doing comes on a broad based commodities deal. it's not all that different than

just buying petroleum jet today. i mean, our buyers are out there taking risks in the commodities market with that, and so it's sort of the new generation of that. to add one more thing while i have the mic is we're talking about aviation alternative fuels today. that's the pam, but we're not expecting alternative fuel to solve all energy issues. that's important. we're talking about additional fuels essentially for the next several years and many years and so things like speculation, undo oil speculation and appropriate regulation of that that the air transport association promoted and a broad based energy policy going to all kinds of accessible and environmentally friendly sources in the u.s.. this is one of the basket to get to the aviation. you have to have energy policy that supports an industry like

this that is the backbone of the economy. >> joe, what's more important right now in this discussion? is it the environmental issues or the economic issues? in europe, what's driving the discussion? >> i think this europe for the time being it's clearly the environmental discussion, but it has to be proven that once the prices in the market, those who are claiming to be environmentally friendly are going to pay the price, and we'll see to what extents the airlines will do that. on the other hand, i think it's fair to say that we are always comparing the petroleum industry with the chance do develop over 60 years to have the perfect running integrated lo logistics chain with the industry that is just moving the first steps forward. again, i think we should have the chance and of course the support from the government, not only the u.s., but worldwide,

that we need a certain space where we just see what are the best ways to do it, and as nancy said, we need now the first money in order to show practical things to go for industrial scale, to see what the real market price in comparison to petroleum-based jet fuel really is. nobody knows it as of today. therefore, we have to jump into the cold water and see if we can swim or not. >> i like that, get everybody primed now for questions. we're running on time right now. i do want questions from the audience coming up. billy, you got $100 million, where are you going to invest it, young man? >> well, in this sector, there's a number of opportunities in agriculture, in some of the processing steps along the way, certainly in refinery space, in distribution.

it's probably an integration role and it's probably the biggest opportunity now, somebody who can put pieces together with other parties who are experts in each of those. that's my pick if i was going to invest. >> what are the distribution issues? >> distribution issues coming in a couple forms. for example, how do i ag grate enough agriculture product in enough volume to make it worth your while to do the processing. you have to distribute the raw product into the processer. the other piece is where am i going to locate that oil refind ri in access to refineries and how to get it to the airport and what airports do i want to target first, second, and third in order to take the bargains i'm planning to produce.

>> who does that? is that what you do? >> entrepreneurs are kind of leading the way here, small and medium-sized businesses, people with a unique niche, even an oil company who sells jet fuel, but maybe a smaller less well-known player. i won't name names. >> sorry, tried. [laughter] >> i think the first entrance will not be the big names to connect us. that doesn't mean in a few years the big names will be the big players. they're in a natural position to do that, but the smaller player folks will be there first. >> what differences do you have in europe in doing this, joe?

same problems that we just discussed? >> generally, yes. i mean, the difference is that the farming industry in europe is already supplying ethanol to the road transport sector so therefore we as aviation are a little bit late in just saying, hay, we also have demand for biofuels, and the problem is that we cannot afford, and we're not going to do that, a price war against road transport fuels because this is a prized competition and nobody really has a win of. however, the point is that we have to find a way how to get in europe biomass feed stock, and this seems to be a problem as with a dense population, just consider germany, more or less 82 million people living in a area of a little bit bigger than the state of florida. there's nothing left in order to

produce a biomass on a large scale not already being used. we as an airline are looking into the southern part of africa, looking into brazil, southeast asia as our future suppliers for biomass because there's hardly nothing to get from our domestic markets. that's the difference between europe and the u.s.. >> big differences. nancy? >> we're really looking at very home grown industry from the air transport association of america approach. that said, when we go to other parts of the world, we want to be able to fuel up alternative fuels there as well, and so through our work with the national civil aviation organization, through kathy that i mentioned a few times, we're really trying to derive compatible specifications.

things like environmental criteria, dealing with the logistics issues raised, we are working those through the networks of groups around the world. >> any questions right now? please. >> i'd like to point out the difficulty of the financing issue so i'm going to be -- violate the hooker rule and be the first one to mention money. [laughter] if in the context of using non-food crop biomass as a feed stock, generally logistically about 100,000 tons a year of input our studies indicate that's the optimal level of production. that gives you 36 million liters

of product a year. the problem is if i'm using a yeast firm mennation process, i'm going to sell it for maybe $2.50 a gallon. now, that's going to cost $70 million to build costing $5 million a year to operate. the problem is even if i'm lucky enough to get venture capitalists to look at a deal that's $70 million deal, they will tell me, why are you not going to make ethanol that you can sell for the equivalent of $6 a gallon opposed to jet fuel for $2 a gallon. the importance of offset agreements, potentially loan guarantees are just absolutely essential because i personally believe that much of the opportunity is in production

facilities where you look at a throughput of about 100,000 tons a year, and i respectfully disagree. i think you we can find you biomass in europe to give you jet fuel with, but it has to be able to get bank financing, and without the offtake agreements and possibly loan guarantees in exchange for giving you the emissions reduction units, it's not going to happen. >> well, we welcome you to the panel because those are exactly the typing of initiatives we're trying to work with existing programming primarily. in 2008, the air transport association and some of our allies were successful in getting in the farm bill a recognition that aviation alternative fuels should at least be prioritized the same as ground-based alternative fuels, and so the usda, the department of energy, faa, and others have

really responded to that challenge to try to take existing tools and help us find ways to get suppliers and oil crop folks and all of those connected into that, but we're really setting our sights on the 2012 farm bill, and, you know, as an aviation and environmental attorney, this is relatively new ground for me, but it speaks to another one of the issues raised on an early panel today which is these are kind of exciting things that we should be getting our younger engineers and the people in our companies really engaged in because this is, you know, great infrastructure challenge and opportunity. we just need to try to align the public policy to help us get there. >> if i could add to that just a little bit. i suggest to you, and i made the case a little earlier, if involved with the producer directly in the process leads to a commitment on their part and

if you build a fuels plant and producers involved in that, they're more than likely committed to that plant and supply you the material you need in order to make that plant keep working. that was our experience in developing the ethanol industry. they just want to make the case for that kind of a business model, at least up collusion financially of the producer of the product in that process. >> other questions? let me ask -- oh, please, yes. >> bob pool, reason foundation. i learned a lot from this session because i haven't been following the aviation biofuels evolution, but i'm also a little surprised at the emphasis on domestic agriculture as thee solution. when i look in the technology literature, i see a lot of venture capital going into enzymes and catalysts, but people are looking at algae which is not grown on farms, at least necessarily, and things like brazillian sugar cane

suggesting they are a larger producer of u.s. farm biomass. is the tail wagging the dog here? you start with the most effective cost approach to get to a sustainable biofuel and then you ask can farms in the united states be the supplier? >> go ahead, please. >> this goes back to the comment about needing a portfolio. if we talked too much about domestic, it's just because of where we are at because really it is about supply chains around the world and in some cases those supply chains start in one country and lead to another, and just all kinds of combinations, and if you think about where we get oil, it's certainly not largely domestic. it's transported around, and often people say well, are you going to grow this biomass and transport it around the world?

well, you reduce it to essentially oil, so that's no worse, and we can do a lot better by producing biomass instead of extracting carbon. >> nancy? >> i want to amplify what i said because i think my comment might have sparked that. we are very, very focused on what we can do in the united states. those are the programs we are work with most directly. you know, you heard doug parker talk about the desire to keep growing our international markets. we have a fairly mature dmes market, but we have a lot of domestic needs so that's where we are looking primarily at the air transport association, but not only that, and things like commercial aviation alternative fuels initiative or the sustainable aviation fuel users group, these coalitions we're in are really global coalitions, and we're kind of -- and i use this term and people laugh, but we're "seeding" these things

around the world and using the opportunityings, but you really have to get pilots going here, and i think we have an extra commitment as companies based in the u.s.. air transport association, airlines to making our economy work is the undersecretary has said. our ability to invest in the u.s. is important to us, but we're not skewing the opportunities that we have else where. >> see if i can make this work. tell me where to stop. >> keep going, keep going, keep going. >> this we go. these are projects that are going on right now to look at what works in the region and how they are connected with other regions, so you can see everything except apt -- antarctica. [laughter] >> any other questions? please, back there. >> i have a question, and carol

pondered this as well. as part of preparation for this i went to the co-op yesterday and brought a list of seeds i wanted to buy, and i got blank stares. [laughter] the amount of energy, no pun intended, required to make this work is enormous. please. >> you guys talked about prize and the feasibility here and the emission facets to the airlines. my question is what is the carbon footprint to actually grow the various products, refine them, and then transport that, and do we see a net carbon benefit not just in emissions reduction? thank you. >> nancy? >> i think we can probably all add to this so in 2008 our board committed that what we're seeking is alternative fuels with a better emissions

footprint on a life cycle basis than petroleum-based fuels and what that means is you have to analyze obviously from growing the crop or cultivating whatever it is, i mean, whether if you're taking coal or whatever, transporting it, processing it, all the way for us to wake of the aircraft, and we really have driven the methodologies for life cycle forward. we know how to do it, an apples to apples comparison. it depends on the feed stock and the process and how much benefit you can get, but we're seeing, you know, 10%-0%, and a study came out yesterday, the yale study that you guys were involved in with a particular set of detropa as a crop and certain processing, you can get up to 60%. it's going to vary how much ben dpit you can -- benefit you can get in terms of co2 or other emissions again,

based on where you are in the world, the country, what crop you use, what feed stocks, ect., processing, but we'll take any environmental benefit. >> that was a study that we fund ed yale to do and the first study of that scale on that plant and then turning that into what it means for jet fuel and 60% was something to be confident about. it could be higher, certainly be lower if you do the wrong things, but also camelina was talked about and the life cycles there and used for several the flight demos done and 83% is what university scored that. it's pretty good.

at the same time, we need some standards, some criteria to make sure that you're making the best possible choices, and doing this in a way where you can sort of have a good housekeeping seal so others recognize how well you are doing and give you credit whatever credit means. >> thanks. >> nancy, i'm disappointed. you have not railed about crazy environmental taxes. [laughter] the whole time, it's just amazing, but suspect that really another part of the economic analysis which is if we keep using petroleum-based fuels, we'll continue to attract taxes like in germany, in the u.k., all these people who want our money because of our carbon foot print, so following on with your, you know, your last

comments about this is a better carbon foot print, don't we save some money potentially if the two fuels are priced the same, one taxed heavily and the other isn't? >> yeah, you should come on the panel too, nancy. what i say there first is that the iron yi on taxes and proliferation of them is they are sigh fenning away the roirses we'd like to use. they are counter productive as an environmental type of tool, and we have targets and measures that we're pursuing to continue our good record of environmental improvement, but you are correct as well to the extent we can continue to drive down the carbon content over the life cycle of our fuel and what we

do. carbon based requirements like the illegal european emissions trading scheme we're going to defeat in our litigation -- [laughter] will go longer be as attractive to regulators to put the measures out there so -- but i think first and foremost you have to think about just even the wrong approach to try to achieve an environmental end to put a tax or a charge on us because it takes away our money not just for alternative fuels, but for the winglets that dave barger noted and the aircrafts that boeing and bombard wants to sell us, and 10-4. >> that's the last word on the subject. i want to thank the panelists for being here today. it's been a wonderful experience. thank you all. [applause] >> one thing that i hoped you have noticed in your program, this last panel was sponsored by

atlas air, the panel that was the ceo pam was sponsored by rolls-royce, the aopa sponsored the airports panel, and rockwell-collins sponsored our sensible modernization solutions panel, and cress that sponsored the first program of the morning the conversation between jackpotter and janet kavinoky so we have two more things to go, but right now, i would like to give you a 20 minute break, and then please be back to get the last panel of the day going at 3:40 sponsored by ata, and then nick will be the final afternoon keynote speaker. [inaudible conversations] [inaudible conversations]

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[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> the u.s. chamber of aviation conference continues, and a discussion of airport and airplane security. panelists include representative of the u.s. travel association and security consultants. also, a look at the next ten

years in the aviation industry with the airport association president and ceo. tonight here on c-span2, book tv prime time and "after words" with susan on her book and former defense secretary donald rumsfeld on his memoir, and at 10:15 author bruce riedel looks at the global jihad movement. >> live saturday, the black tie dinner starting with the arrivals and later remarks from president obama. our coverage includes past dinners. it's streaming live on c-span.org and c-span.

>> the keynote speaker today was the head of the boeing commercial airplanes, james al albaugh talking about threats facing l airline industry and security and it included a lack of an educated labor force. we'll show you his comments during this broke. >> well, good afternoon, everybody, and thank you for the introduction, carol. you can see i vice president had a good -- haven't had a good time of holding on to jobs. i keep moving around. i'll touch on commercial aviation, but defense and space as well. it's good to look at the crowd.

i see a lot of good friends. here, a lot of good customers and competitors. i should have checked the program because i see allan mcartor is talking after me. i wanted to talk after him, but we're great friends and a healthy competition, and it's good for the industry. i want to talk about the importance of aerospace, you know, the state of aerospace today and talk about some of the challenges that i think we have. i really do believe that our industry is at a cross roads. you know, nobody's ahead of the united states in aerospace, at least not yet, went we are the industry leader building the world's most capable commercial airplanes. you look at the programs coming out out of the department of defense, they are unrare lealed and the military sat lices do things that are just phenomenal, and our orbital manned space program is really second to none.

unfortunately, we're going to park the shuttle sometime very, very soon, but i think that the leadership position we're in is threatened. certainly there are other countries that would like to come after the dominance that we enjoy right now, and you know, we're not in the business of reclaiming the lead. we have that lead, and i think the question is are we going to take the steps necessary to maintain that leadership position, or are we going to allow aerospace to join the space of u.s. industries that we used to lead? i'll be talking about that today. you know, to understand why it's so important, let's look at what aerospace has done for our country. i was very fortunate to join aerospace in the last quarter of the 20th century, and to me, aerospace defines the 20th century. think about commercial airplanes, how it brought people together. you think about during world war ii, you know, the tens of thousands of allied airplanes

built to help us win that conflict. you think about commercial satellites and how they changed, you know, the way that we communicate, and certainly when we walked on the moon the first time, it really changed forever, you know, how we look at the world around us, and i'm convinced that aerospace again will define, you know, the 21st century. the question that we have is will it be u.s. aerospace that does that? i think that's a very critical question because aerospace keeps america strong. you know, there's no industry that has a bigger impact on our economy than aerospace. 23 you look at exports, there's $53 billion surplus as a result of what the people in this room do. you know, president obama has called for doubling of our exports over the next five years, and aerospace will be in a leadership role in doing that, and if you look at the impact that civil aviation alone has on the country, it's breathtaking. it's responsible for 12 million

job generating around 6% of the u.s. gdp, so what does our commercial marketplace look like today? you know, i think it's vibrant. it's growing, and it's challenging, but rapidly changing as well. for those of you in the room here that operate airlines know what's happened in the last 15 months. the market really has come roaring back, and i think 2010 was a year that everybody enjoyed. it's been somewhat subdued this year as a result of oil prices, but still in a very positive position. you know, at boeing we have a seven year backlog now, $263 billion, and with air traffic increasing at 1.5 times the world gdp, you know, we think the future is pretty good. you know, our estimate is that the gdp is going to go up over the next five years between 3.5%-4%, and you do the multiplication on that and not

discounting northern africa, and over the next 20 years, there's a market for some 21,000 commercial airplanes or $3.6 trillion, and that's a marketplace that a lot of countries and a lot of companieses are eyeing. ..nd i'll talk about some of them. first is globalization and the second is competition and the third is some of the shifting demographics we have in our work force. let's talk about globalization, you know, first. the world is very interconnected, but i think that interconnection certainly has made the world much more complicated as well. we saw the earthquake in japan and despite the fact that the epicenter was some 4,000 miles away from our manufacturing facilities in pugot sound, it impacted us. tom friedman was correct when he said the world was flat. globalization means many of the partners we deal with and you

deal with are outside the united states and globalization does drive air traffic. we went back and took a look at air traffic back 20 years ago, and about 72% of it was in the united states and it was in europe, and we project out another 20 years, and the number is 45% and soon half the world's gdp comes from emerging companies and that changes the marketplace. we've seen increased competition, and we know it's been interesting between air busts and boeing and allen would agree with me it's rapidly ending. in other companies and countries are attracted by that $3.6 trillion market i talked about. there's china and dray zill, canada and russia. ..

commercial aviation a top-rated. they spent $5 billion on a regional jet. the market did not like it very much. they are not building a.c. 919 and the 737. that will be an airplane that i think will compete very well in china and eventually they will build an airplane that competes around the world with boeing and with airbus. they are investing $30 billion in this industry over the next 10 years. they are one of three countries that has put a man into space which is something i know a little bit about. is a very hard thing to do going from zero to 22,000 feet and eight half minutes.,000 f thatee is hard to do. i have no doubt that they will be able to go the very good airplane. at the same time china is the

largest market that we have lart we have. and they've gone from being a supplier and a customer to a supplier and a competitor and they have done that in about 40 years. they have decided to make airplanes. airplane manufacturing a national priority. i'm sure they will be successful. now, i think that presents another issue for many industrialists in the united states. it is a huge marketplace. it's a marketplace where you have to pay to play. and like any country where we put technology, we have to be very careful that we're not giving away technology that ultimately could help a competitor compete with us around the world. you know, it's interesting, you know, china there you go and it's amazing every time that i visit the improvements, the changes that have been made and certainly they will do that in their aerospace industry as well. meanwhile, military threats have certainly evolve as well. during the cold war we knew who our enemy was and we trusted

them not to used weapons of mass destruction. today, oftentimes, we don't know who that enemy is but ultimately given the chance. they will use those weapons. they have done it before. and as a result we see a lot of shifting dynamics in the department of defense. a lot of focus on the asymmetrical threats and certainly a changing mix of platforms in the security of defense. the demographics are a big deal, i think, to all aerospace companies and right now about half of our engineers that work for the boeing company could retire in the next five years if they chose to do so. and that's the same story at lockheed, raytheon, northup grummond and all the aerospace contractors in the united states. we simply are not producing enough engineers to support the need as people choose to retire in the years to come. you know, to me what's that's going to contribute to what i call the intellectual disarmament of this country. and that along will put our

country at risk. if we continue on this path we could lose our lead in aerospace and break that long-standing continuum of capability in our industry, and our economy will lose an important engine of growth and our country also could become more vulnerable and less secure. now, that's kind of a tough picture to maintain but, you know, companies like boeing will survive. we will go to where the years are. if we are not producing them in the united states we will go where they are, where the capabilities might exist. in my view, you know, our industry right now faces, you know, five different threats, you know, one the industrial base, our weakening industrial base, a lack of innovation and technology, a good environment and a level playing field and our industry as an industry and as a country we have to decide, you know, how we're going to respond to those threats. you know, today i think we take our industrial base for granted but we do so, i believe, at our

own peril. think about what a strong industrial base has meant for this country, you know, over the last 60 or 70 years. it was the arsenal democracy as i mentioned during world war ii. it put a man on the moon. it made america the world leader in space, commercial aviation and defense. but a strong industrial base is really is not a given. it's a product of the right policies, the right investments, the right priorities but also it takes a lot of time to put in place. you know, we don't have to look very far to see what can happen and how quickly an industrial base can be diminished. you don't have to look any further than the u.k. they used to have a great tradition, both commercial and military airplanes, and now they're buying f-35, c-17s, you know, apaches and chinooks as well as airbus and boeing airplanes. they don't manufacture airplanes in their country anymore.

they realized they needed an industrial policy in place and they put in place and it will take years and it will take decades. when we don't invest in development programs and when policymakers don't consider how procurement decisions impact the industrial base, we risk losing talent and expertise that has taken us decades to build up. our engineering challenge is not a fixed asset. if they don't have work to do in the area ospace area, they will go to other industries or they'll retire. and reconstituting that capability will be very difficult to do. you know, right now believe it or not with the f-35 in the flight test program, there are no department of defense airplane programs in development. and i think this is the first time that we've been in that situation in probably over 100 years. you know, my view as we risk following the u.k. and dismantling our industrial base if we don't do something about that. now, you might say that we're building airplanes for the

military so, you know, that's not a problem from an industrial based standpoint. i would admit to you that being a viable contractor, to be an integrator of very complex systems, you have to understand how to do r & d. you have to take r & d into detail designed and into production. you have to run your production systems and you have to have a very healthy supply chain. and what we're seeing right now with no new starts in the department of defense is we are losing our capability to do detailed design. we're losing our capability to transition design into manufacturing. once that's gone, it will take a long time to reconstitute. so i know this is an issue -- that was one of the problems we had on the 7a7 program. we had not done a new development program since the 777 and we paid the price as a result. on the space side, tens of thousands are very experienced engineers are going to be going out the door, you know, very

soon. once we park this shuttle, you're going to see, you know, thousands and thousands of people who have taken 50 years to really build that capability up and go out the door. you may have seen recently where united space alliance who operates the shuttle for the -- for nasa, they announced they're laying off 2500, you know, engineers last week. and, you know, once the shuttle is parked this summer, i would submit to you and the article in "usa today" notwithstanding, i would submit to you that the chinese will walk on the moon before we once again put an american into lower orbit and it's unconscionable that we would do that. there's steps to take, every country is concerned about strengthening their industrial base. and the one we have in this country is one of market forces that in my mind that is not a clear, coherent or

comprehensive-enough policy for the united states of america. and i'm not saying we need a policy that defines specific outputs and production or that we need to build things that people don't want. but we need to start a dialog about an industrial strategy to ensure the long-term viability of our defense and industrial base. it's critical to the long-term economic and national security of this country. we can't wake up a decade from now and decide that we want a capability and find that we don't have any contractors that have that capability or have the ability to do development programs, and i fear that that's the direction we might be going. this is an area where we can engage in dialog. the industrial base might not seem essential but think about what commercial aviation has gotten from the defense side, you know, things like radar, things like gps and the heads up display, satellite communications, all things, you know, very important to what we

do. and i could go on and on with that list. if you realize the industrial base affects everyone in this room. i find it curious that the industrial base was not considered during the tanker competition or at least it wasn't apparent to me that it was the government was willing to put a lot of work offshore and, unfortunately, that didn't happen. but i don't think anybody should think that just one program is going to be enough to sustain the industrial base in this country. it's not. you know, the second threat to america's leadership in aerospace concerns innovation and technology, and we're seeing much more competition on the commercial and defense sides from around the world. in commercial aviation, i talked about the new entrants from canada, from brazil, from russia and from china. and we're also seeing, you know,

other people enter the defense market as well. i know that many saw the new j-20, the chinese stealth fighter as a threat. you know, i really saw it as a new competitor in the global defense marketplace, and it will be. and i think to win in the face of increasing competition and subsidized competition, the only way that we can do that is through better innovation and technology. and at boeing what we always say we want to do is to make sure that we're building today's airplanes -- we're building tomorrow's airplane when the competitor is building today's airplane. the 787 dream liner is a great example of that. it's an airplane to say it's the first new airplane of the 21st century and i know that airbus delivered the 8380 in the 21st century but i would submit to you that the 787 is the first airplane to use 21st century technologies in the manufacture and development of the airplane.

you know, some companies build an airplane and then they try to sell it. what we do we sell an airplane and then we try to build it and sometimes that presents some issues for us. [laughter] >> you're reading about some of those, i know. but what it does, it always provides an airplane that people and will continue to do that. and from my perspective, there's certain ingredients to innovation that you can't be successful without. you know, first of all, you have to have a desire to be the best. you have to compete on the world's stage. you want to make sure that you're always building the best that you can in the markets that you serve. you also have to have a commitment to invest in technology and also in the human resources necessary for innovation. you also have to have a culture of openness where people are very comfortable talking about radical ideas, pushing the envelope and changing the way things have always been understood to be built or to be designed.

and then you have to have a skilled, capable work force and leadership culture that encourages innovation. and then i think you also have to have an awareness that the best ideas don't necessarily come from your company but can come f we are back live at the ate -- a panel discussion just getting underway on airport and airplane security. >> is all because of the tsa. i just had all i could take. and may not need exactly fair, as hard as i will try and she said, i know. [laughter] but, so this will be a little lively, but anyway, i intend to do something that i probably will fail at miserably and nobody here is going to believe

and that is try to keep myself out of this as much as possible and just ask questions and let them do the talking and be the moderator. but, i spent a little time in europe, and talk to a lot of top security people over there, and they helped me understand a lot about why the united states was doing the things it was doing, especially early on in security. it was a bad, bad, bad time in many ways. and then i would fly to europe and the tsa -- their version of the tsa was very polite, easy-going, professional. all that sort of stuff. and i talked to several friends and said, what in the world is going on here? all your people are polite and

your citizens, your flyers will not put up with any garbage. they seem to know that. and they said, don, don, don but explain something to you. your country is only a little over 200 years old. it it has only had one war on its shores and in that one war, it was you fighting you and now you sing its praises for whatever reason. and it made you a country. fine, so -- but we have had people marching across our fields for centuries and centuries. and we learned long before you were a country that at the end of the day, no matter how much violence, hot herbal things were, what countries were taken

over by who and how many deaths there were, the vast majority of us tonight will we'll have a nice dinner with a nice glass of wine. we understand that. your people don't understand it yet. and i said oh. but, so, let's get on with this. i want to ask a general question to start out with and by the way from time to time i'm going to turn to the audience. i am not going to wait until the end and pile everything on. i'm sure a lot of you have a lot of questions. the main thing i will say to the panelists and to the audience, everything, let's keep it short and to the point. we have only got an hour here and the first question i want to ask and it goes to everybody on the panel, and it may sound a little harsh, and maybe it is,

but just -- the tsa after 10 years still need to exist, and if it continues to exist, where does it need to go now and if not, what would replace it? so let's just -- oh and i should say who is on the panel, shouldn't i? i knew i wasn't -- i knew i was missing something here. we don't give, as you know, long drawn out things. keep that question in mind and think about it. to my left is gary wade, vice president for security at atlas worldwide, moma gell and with command consulting, ralph basham with command consulting, roger dow, ceo of the u.s. travel association, and lob pool with

the reason foundation and i cannot resist one short story about lob. he is with an outfit that doesn't exactly always cater to passenger rail and this is the only time i am going to mention that. but he has a massive model train set in his basement and i have now decided to go down, probably this fall, and spend some time with him on it. i am impressed. anyway, back to the question. we will go to you first. >> with that i probably, that question wouldn't be asked if there hadn't been as many bad experiences that people have had in the past. from a cargo perspective, yes, they need to be in existence and they are doing a much better job working with the industry, the cargo industry now in formulating regulations and policies that help us meet the threats as opposed to doing it

independently. nobody knows the aviation business like the aviation companies. we know what -- we do it every day in 150, 160 countries and 300 cities so we know how the freight moves. we know where the soft points are. we know where our vulnerabilities are. we just need their help to show us where the threat is. so the short answer, yes. >> i think absolutely that -- i don't know what you would replace it with now. i would be afraid to suggest what that might be, but i think there is a genesis or there is a generational change in the air that needs to happen and i think anybody regardless of whether it is caused by an event are caused by the experience of friction that occurs at check points where with what gary said with cargo and the industry, i think

as it matures, that it does need to change in terms of how to address the future, say 2015 etc.. i don't think you can say tsa needs to be replaced but i do think that there are some fairly dynamic issues that have to be resolved and i don't think it will be resolved by a government agency. i think it is going to have to be resolved by the industry itself and the people who use that mode of transportation. and it is time that we face that and we start talking -- you hear people say all the time let's take a risk-based approach. when you say that, be ready because you will have to sign a risk-based managing risk means something could happen and everybody needs to understand that. regardless of what system you put in place you have to understand that is the case so signing the dotted line is what we need to do. >> i have a very simple thought on that. i guess until the president of

the united states can look the people in the eye in this country and say to them that they no longer -- there is no longer a threat to u.s. aviation, then tsa or something like tsa has to exists. the american people expect to have that security and until we can assure them that there is no longer a threat, then it is our responsibility to ensure that they are safe and secure on those airplanes. >> i concur with my colleagues i guess there has to be a tsa, but i believe in this world of technology, information, data and a country that put a man on them and there has got to be a better way and what we have to do is explore a better way. you can't treat every individual as the same degree of terrorist. we have to find better ways and

i believe it has to evolve but it has to exists. >> i agree with roger on that point certainly that we need to move towards a risk-based system rather than one that treats everyone equally likely to be a threat. i also think when we created tsa to the legislation that was hastily enacted in the fall 2001 and i was in some of the debates on the hill on that, the congress made a fundamental mistake. they combined aviation security, regulation and policy with the provision of a piece of that, namely the passenger screening, passenger bag screening and candidate didn't do that, europe didn't do that. in europe in particular screening responsibilities devolve to the airport level under national government policy and regulation that is enforced, and the airports, most of them can do it either in house with their own workforces or by hiring a federally licensed qualified private security firm. that is a far persevere your model in my view and would put the providers of security on the

same arm's length basis with the security regulators, the successor to tsa as the airport itself is, as the airlines are, everybody else is regulating. when tsa screws up they are not objectively evaluating their own performance. we have evidence and fact that they have tried to cover up the study that they commissioned on how their performance compared to the private screeners and didn't like the results and didn't publish it and it was only because gao did a report on this that we do know that existed. >> do you expect that to happen in this administration? >> well i am not sure. i've seen no it -- from the administration but april 15, peter king and mike rogers, homeland security and the house said they were going to do an authorization. a reauthorization of tsa this year the tenth anniversary of 9/11. i think it is highly appropriate timing to raise that question. take a fundamental look at what

did we do right and what did we do wrong and do we need to revise a legislated and change the nature of how it was created. >> roger, you came out with a report not too long ago about recommending a trusted traveler program and doing some other things that would speed things through security. could you tell us a little bit about it, what it is, who should supervise it, and if i might go one step further, obviously this would do a lot for the frequent traveler and the businessmen. what about the one time flying mommy with two screaming kids? what would you do for her? >> i think as you said we did put that study, which was basically a blue ribbon panel together headed by tom ridge the first head of the -- that is the

new guy coming up next week. the first tsa and also -- but we also have david frum fedex. they know a lot about moving things and where things are. we had security experts. we had -- stephen had the civil liberties folks and we had every group take a look at it and we basically came to the conclusion, the panel did that we have to have based trusted traveler program and to have a trusted traveler program that means who is going to run it? that part has to be governed right. you to the databases and you have to have the information and you also, i would like to agree here but my concern is one of the things we found is inconsistency. the problems you have is in one airport you have to do this and another airport you have to do that so we do think that you have to have a consistent program. maybe you could run it with the airport but we do have a data. the second thing it has to be voluntary, the civil liberties union folks went berserk on a lot of things but we basically set him at the bottom line is i

will give up my high school grades if they want them if he gets me through the line faster. it is not going away with security but it is changing the level of what you go through and having randomness and lastly that is the real benefit. we can treat everyone the same with one-size-fits-all. i literally and personally watched gerard get patted down. i personally have seen colin powell get patted down. you have to say wait a minute something is wrong here and about the first-time traveler, this is where i agree with carl. i think you have to profile by experience. you have to profile by frequency, by background and all that and those kinds of things, once you have that data than the first-time traveler probably has to go through different security process because they are not the same as all of us who travel 50 times a year and we know an awful lot about us. >> does anybody else want to discuss that point? >> the report, 85% of the report i am absolutely in agreement. i believe that the only way that

we are going to succeed in the public attitude, first of all i would say it is my thinking that it is the governments responsibility to ensure his safety and security of the citizens of this country. we have got to find a way to reduce the size of the haystack and we have got to figure out a way to get information that is sufficient to give tsa and dhs the sense that the people that we are doing minimal screening on represent the least threat, to focus their attention, resources on those individuals who we know could represent us. the trusted traveler programs, advanced information, better data, better systems, better sharing of information is a critical piece of this. we have to address the

legislation. the legislative issue as you pointed out, but i think in terms of that report there are many -- most of that report i would be total agreement. now, the problem is how do you bring that report and the information that report to fruition and with this in the hands of the men and women who are on the frontlines? and, i have heard people say you know, how can disney keep people standing in line for three hours with a smile on their face waiting to go into space mountain? well, those people in that line for three hours are not going to be faced with searching their personal belongings and i don't think there is any concern if someone is going to blow up space mountain, so it is a different -- but you are absolutely right, but tsa has got a huge job on its hands. i am trying to be brief.

>> i understand. >> i was part of the beginning of tsa as was mo and i can tell you it was probably the most difficult. i've been in government for years. that year and a half was probably the most challenging. john who was the first administrator had tremendous job ahead of him trying to do that and they are still young. we can't look at tsa likely look at the secret service or customs that have been around for hundreds of years. so there is some maturing that needs to go on and there needs to be some correction. >> ifill yesterday and i hit for airports. pretty happy experience quite frankly. >> and mo and i had a very interesting discussion out in the hall earlier, and looking at it, i wonder if you could take us from the point you left us there, that is not a sadly left

us but the beginnings, things were kind of rough, and we sort of know what it went through a little bit later, but where is the tsa now in terms of what we the passenger or at least they the passenger would see, and where is it going? what is being emphasized now? ..

>> we didn't have time to stop. starting an agency from scratch. we are still feeling the effects of that time frame and never had a chance to sit down and really think about and strategy. we were trying to change the aircraft engine while it was in flight. and that's a very challenging thing to do. >> you know, just to give you -- first if we can digress for a second. in terms of trusted travelers, i agree. what i'm not sure is that i agree the government should own it. i think they absolutely have a responsibility as raff said to protect the populous that they govern. i believe you can't protect the community about the community's involvement heavily. what i think is, you got to get the people in the room to design the right program, and do it right, and leave it to

government to do in and of itself, i'm not sure you are going to get the kind of program that you need. i support it. tsa when it was ready started, people in the room who i can see, the bright lights there as well. you have to understand, you walk in the door and there was a small group of one people that sat in one room and answered all of the phones. they decided they had to have how many security officers, where are they going to get uniforms, who's going to design them? who has something we can get today and invite 380,000 uniforms. it's not like you can build an organization from the topdown with a lot of thought. the real tsa didn't start until about july or august until about 2002, when you started rolling out across the airports. i remember distinctionly, and i've told this to others, one night about 9:00, i was sitting in the room and the phone rings and it's her grandfather, saying that his daughter is getting

ready to travel to the middle of the u.s. he wanted to know if it was safe to travel. how in the hell me got me, i have no idea. but the truth of the matter is we had no idea. and as much as we tried to bring in, and the industry frankly was in flux because it had a huge impact on the operational capability and their employees as well. to find the people that understood aviation and transportation along with security experts, it became heavy to secure, which frankly, it probably should have been. but you just didn't have time to manage or direct the way that you knew you needed to, because there was a congressional mandate, a deadline that you had to meet. no excuses by the way. you didn't get stake, and we have another year. it was do it, do it now, and smile. i don't know how many have ever tried to do that, by formlating

a work force of 65,000, butt smiling part was hard. but we got it done. and in the end we got it done. and i think everybody in the audience, including those with tsa would say that we all wish they could use improvement. i've been out of the ring about two years. i'm rusty. i don't -- i'm not adept in understanding today's policies, procedures, and technology as i once was, but in my heart ofhearteds, i believe that the american people really want those officers on the line. now how they treat people or act and what they do is up for debate. >> was there a strategic mistake, just a quick follow up, when this machine was put out there that seemed to strip people naked? what were -- were you surprised, i gather, that the current tsa leadership was quite surprised

at the uproar that came out of that. where did that uproar come from? and again, were you surprised? >> i this that that event points to another of the problems that tsa faced. if you remember right after 9/11, richard reed with the shoe bomber, that was totally unanticipated threat. so you immediately had the responsibility of responding to that threat. then in 2006, august of 2006 with the liquids. that represented a huge threat to the american flying public. people said my gosh. we got to do something about this. then on christmas day who, you know, i don't know whether he said in 39a, you know, purposely to be some strategic point there. so it's a reaction, a reactive

process that tsa has had to go through. because if you were to try to anticipate and build a security system that was going to break every single and every threat days. it has to be threat days in what is likely or what is written. because if we did build a system that was going to avert every single possible, potential, for an attack on an aircraft, you couldn't be flying. because that's the only way to prevent it is to keep the airplane on the ground. and so -- but i think there's a lot that can be done. i think this report that you've put out and others who have made the suggestions here. but it has to be a partnership. it has to be done in a mutual environment of cooperation and discussion, and it can't be this beating each other to death all the time. it's got to be setting down, what's in the best interest of this country, and the flying

public, and the industry itself and the economy of the country. it's got to be done together. >> when you talk about the challenge that was faced just before the holidays with the new scanning machines, the reality is it was close to 1,000 machines and 4500 plus, i don't remember the numbers quite off, portals. you say to yourself, you are a terrorists and there's 3500 uncovered areas, what is putting all of this emphasis on the thousands of machines going to do. tsa is between a rock and a hard place. they don't have the machines. they are trying to put forward a procedure like i had 4800 machines, and you don't. that's a challenge. the machines don't pick up the explosives. >> how would you have -- if you are a tsa, if you are the administration, how would you have responded to this new threat? i mean because there was a demand that something needs to be done. and i'm not suggesting that was

the right thing. my confidence -- >> my suggestion would have been to expand the watch list, the people that were mandated to have secondary screening. use a much broader of the various watch list and use the ait machines for that purpose, for greatly expanded, secondary screening for people that you have a reason to think might be trying to bring explosives on to the plane, instead of pretending that you are going to do it to every one and trying to go forward with that. >> when i go to most airports, the machines aren't being used. i was just recently going through bwi and all of that. i said gentleman, i'm not being critical. i'm curious why you aren't using the machines. he said labor, you got to have one up front, one looking, each machines is adding three or four people. we don't have the work force to operate all of the machines. it was interesting there.

>> the people have a correlation with how long the lines are. because it takes three or four times longer to put someone through that than walk through the magnetometer. >> fortunately, there was not enough people out there to thoroughly process. i read in the report, there's an expectation that there was going to increase by a third over the next five years or whatever that number. we had better be starting now to start thinking about a redesign, trying to figure out how we're going to move, what is it going to look like? i don't care what technology that you have, you are still going to have to go out and reconfigure the airports to go out and accommodate the passengers. the point about someone blowing themselves up in the line, waiting to go through the machines. i go back to rome and the red brigade.

that's been an issue in airports for many years. this is not a new threat. >> not exactly an unknown tactics. >> right. >> i might add after living and working in europe, i see that the vast difference in the philosophy of their version of the tsa and this one. here any failure is a total failure. congress will raise hell. there, their version of the tsa is recognized as the last possible gate. it's a gate with civs, anything can just about get through it. but if the intelligence section of their version of the tsa hasn't found it, and by the way, this may disagree with something that you say, they say why do you people have so many people

on your watch list? we've got about 300. we know who they are. we watch for them. >> but, don, yet, the europeans are so still goosy loosey, they won't share passenger name data in a truly effective transatlantic way. >> i think it's interesting to do it back and forth between europe. >> is it getting better? >> all right. >> all right. i want to go to gary in a second, first, does anyone out here have a question now? no hands. did you guys have some wine for lunch or something? [laughter] >> all right. okay. >> i'd like to ask you to pick up where you left off there

about the transatlantic. what are some of the thing that is could have been done to increase the transatlantic cooperation and make a system that would benefit both because you've got more layers and more people doing the right things? >> well, one the -- one the challenges that it's facing now is different for the airline is the second screening when someone continues on. we said that we trust and we're comfortable that the passenger taking off from europe is not going to be a risk landing in new york, or chicago. but when that person is going to go on to des moines, we don't trust what they went through, so we have to put them through the process. which is a challenge. i think we have to figure that connection issue. i don't tell letters of misconnections, miscruises, through stuff that we said was okay in our minds when it left

amsterdam or whatever, which our friend wasn't. but the bottom line is that's one issue that transatlantic really has to be addressed. >> you know, you have to understand, honestly, that you are dealing with a very complex system. and in the complexity theory, and the dynamic response, if you touch one thing, there's results to that throughout that system or that network. if you are going to go through a federal inspection station, coming into the country, then -- and you say you are going to miss connections, then you also have to think, okay, what are the schedule they are on as well? and are there accommodating schedules associated with that? i mean all of these things are connected. if you ask somebody and a lot of people that i see, by the way, i'm a travelers, i travel a lot now. so i see it a little bit differently; right? and what i think is is that the end -- people see airport experience as airport experience.

they see it whether it's transatlantic or u.s. they don't -- many of them don't distinguish -- i've actually met when was back doing this with actually met with passengers and cities, and they didn't even know who it was. we went through a program with them where they helped designs check points for us. you would ask them questions about security, they saw all one. they thought -- some of them still thought the check points were by airline employees. this has been ten years, back then it was seven years. you have to understand that anything that you touch may six that one piece. but there results. and it was in the cargo world, supply chain, logistics, challenge movement, or whether

any of those things that happen is a very complex network that are occurring. when you touch them, there's a result. if you don't calculation that as part of the result. i don't think tsa have the answers. i think people in the audience have the answer to all of that. you have to sit down and think about any time that you touched something were results. because gary is going to know in his world that the u.s. travel association is going to their that the airline carriers are going to know in there. you have to understand that the regulatory body that represents, i don't know. i think you can make it work. everybody wants to make it work in this country. >> i'm going to ask a question myself here. because i too just came into atlanta and went through the second. and i was curious as to why do

after having gone through a screening, you know, very, very efficient screening in a foreign country and came in. but the problem that i'm told is unless you can creation a totally sterile environment within that area that the passengers coming off of those planes and then, you know, going into the u.s. system. i'm not suggesting that is accurate or not. i think that's a part of -- you know, secret service takes the president to europe and relies upon to a great extent their security. maybe you can help me with that one. >> well, it depends on -- there's certain parts of the world you'll be more comfortable with than others. >> yeah. >> and i've been to some that i think probably should divert us.

but the truth is then you -- then you began to segregate what you are accepting as the lever of security that you feel is appropriate. and you can tell you even some of the countries that i've been through, some of them paid more attention than others. they don't want anything to happen. going through the federal exception, getting your bag, getting it and going back, and catch it. the carriers were trying to make it as easy as they coo. having a place to go through the bag and have a check point, and design a system in an international airport where you can process those people separately in a streamline way would be the right answer. then you have to tell the

airport, we want you to change the facility. we want you to change and do some construction to change it this way. they are going to say you guys are paying for it; right? no, just do it out of the goodness of your heart. so you are not going to -- any time that start down that path, you have to understand that there's ramifications. until you see that level of presencety, i'm not saying they don't need to be, i'm saying again everybody has to sign up. >> i think was your question more to important that's improved with respect to the sharing of information and data between -- absolutely. i think there were great strides made during the secretary chertoff's time at dhs. negotiating, you know,

agreements, particularly in europe. and i think secretary napolitano has continued to work on trying to because they recognize that a big part of that is going to having to to rely upon our foreign partners out there to ensure those passengers arriving from a foreign country has been screened, have been checked, they have been provided with the proper information to run the data, to see as we said, someone use that dirty old word a while ago, profile. we are targeting people that we should be targeting, and the other 99.99% can pass through the check point and get on their way and not go through that hassle. but it is about -- but, you know, a lot of these countries are very hesitant because of sovereignty issues, legal issues, of being able to provide the information that we feel we need for us to be feel comfortable that that person is

a quote, unquote, trusted traveler. and so they are still working on that. that's a big part of the solution. as i said before, cutting down the size of a hay stay. >> one more. >> yeah, i think not on this particular question. i want to hit the reality. i've said here in this program and they've talked about by 2020 there will be a billion travelers, and it'll be three times by 2030. and if you look at 2004, there were 618 million passengers. last year there were 623 million. so there were five million more passengers. yet in the same time period, tsa's budget went up by 70%. we're hitting the point if those numbers are true, increasing, this system will just fall in on itselfs. i agree with what both ralph said he agrees with 85%, moe said i don't have all of the answers. i agree. what has to happen is a huge priority of getting the experts

together and working it out and making it a high priority of here's some thoughts from some smart people. it now has to go what these guys said, get the right people and make it a high priority. we cannot with the level that we have right now, cover -- it's unsustainable. yeah, it's unsustainable. right. >> i'd like for you to -- in your report, you talk about the privatization of the screening system. i mean i'd be interested to know where you see the advantages to privatizing what i consider to be, you know, fundamental government responsibility. >> this is an ongoing long debate. i mean i think there's a number of reasons. for one thing, the little empirical evidence that we have in the united states shows that the screening performance measured by things like, you know, detecting fake gun images on the screens and so forth is as good or better with the

private firms than have been certified by the tsa as the tsa own screening. second, i think there's greater accountability. you can -- if the firm does not perform, you can fire it from that airport, yank it's certifications so it can't be in the business any longer. that's very difficult to do when you have a one size fits all government civil service, now unionized work force that becomes an institution with it's own self-perpetuate as a major goal. those are some of them. don is eager to get on to another subject. >> it's okay. you are answering the second question from now. go ahead. we'll finish that one off. >> okay. [laughter] >> i don't need to be the moderator. >> if we redesign the contracting to be a little less rigid and centralized, in other words, approve a set of how ever

many verbs can pass the tsa's criteria for being acceptable for this size and so forth, let the airports pick from the list of firms and hire them and fire them with the tsa federal security director over seeing the process, making sure they abide by all of the regular laces and so forth. that way, you have ability for the firms to innovate and come up with new things. as long as they still keep their tsa certification and are, you know, not doing anything that the federal security director says is out of line. i think there's a real potential there, you hear this from airport directors, including the ones that have, like sfo, that have the private firms. they feel frustrated. the private firms would like to do some things, but the system is too rigidded that they can't do to innovate and drive more value for the dollars that are being spent right. let's go on to a fascinating, fascinating area. i talked with gary on the phone

the other day. it was supposed to be sort of a short chat about, you know, to help me understand what questions to ask. an hour later, i looked at my watch, i had no idea that much time had passed. you -- you helped these people. you don't have the time that we had. but help -- and i don't even know what words i can use to ask the questions because i'm not sure what i would reveal if i didn't watch myself. but so just walk talk to me about the coordinate problems or opportunities or whatever you want to call it, the differences in coordination between government and the private sector and talk to us about risk management. now the floor is yours. because i think it's a fascinating subject. >> thank you, don. many of the issues you faced in

the chicago world you heard here earlier. the only difference is we can profile cargo without risks. [laughter] >> they don't complain. >> the word term risk management is thrown around in every venue multiple times. the only heart part of risk management, the key to risk management, is the threat based part. you got to know what the threat is to formulate a risk management policy. how do you find out what the risk is? as administrator pistol said, the key to the passengers and cargo is timely and accurate intelligence. where there's been a reluctant, this is a reluctant on the part of the government to share that key information that we need to protect our carriers, our airport, and our employees from

terrorists acts. we're working with department homeland security under the hand of secretary napolitano to change the intelligence information sharing paradigm so that the enforcement, intelligence community, tsa, dhs has a comfort level with the heads of security of all of the airlines to reach out to them and share information that is actionable. above the terror line information is no good for us. that's -- you can read it in "new york times" before the "washington post" before you can get it on the web site. we need rely the terror line, actionable intelligence that says here's the threat. we've gotten through whatever source information we are utilizing, and you need to go heaven us find and identify where that threat is.

we have the heads of security all of the airlines that we work together and very closely in cargo airline association in ata and security committees. and all of these guys have a lot of experience, they all have secret clearances, they all have a lot of experience in handling and sanitizing sensitive information. so we have hundreds -- each of the carriers have hundreds of thousands of employees out there that can work to look for those suspect passengers, suspect boxes, suspect cargo. so it never gets on to the aircraft. as opposed to 1028 when those passengers actually made it on the aircraft. i don't want it on my aircraft. i want to help the government agency find it before it gets someone else in the supply chain before it gets in the air. so we have the information to do that. we are working on projects that

give tsa, dhs, and customs the information, as far as in the cargo information as far in advance as we can to find out and identify who the suspect shippers are. that may not be a suspect shipper by company, it maybe a suspect area of the world that's the threat is coming in from particularly now. >> uh-huh. >> so it -- and that may change. the dynamic of terrorists, they change all the time. so we need to information on a regular basis. maybe it's indonesia today, maybe it's somewhere else in the middle east tomorrow. where there are hot spots, we can take a closer look at suspect cargo ships. what we can't do is look at all cargo, all the time, all over the world. atlas alone, all this wasn't

into the united states, we moved two billion pounds of cargo worldwide. how can i screen two billion pounds of cargo. that number is small compared to what comes in the united states on a yearly basis. we can't screen away, we can't x-ray our way out of this problem. it's got to be intelligence driven, and it's got going cooperative where we push the look back up the supply chain. so it doesn't get on the aircraft, and we have to have -- have to have that information to be able to do that. so if you look -- if you kind of look at a triangle and said, okay, the trusted entity or trusted shipper. who's your most trusted shipper out there. they worked into the triangle, and you would provide or apply the least level of screening to that. maybe screening, maybe there will be a screening level just notionally.

a screening level that didn't require opening the box. maybe a screening level would be at a trusted shipper, may mercedes-benz. and they shipped on atlas every week. or samsung, or whomever. and we know who they are. they have a program to vet and do backgrounds on their employees, and they have security personnel watching the packing of those boxes, they use tamper evident tape to seal those boxes. so why should i have to look at that? that takes my resources that i should be looking at in a real suspect package away from me dedicated to something that i know is not a threat. as moe said, once you guy into threat-based risk management, you guy in all the time. yes, nothing is 100%. but you are more likely to be successful if you focus your resources on the real threat. not things that aren't threats.

>> uh-huh. anybody want to ask a question of gary before i ask one or two? okay. >> fargo airline association. it's easy to say we need better communication. between the united states and other parts of the world, how in the heck do the get the various branches of the united states government who are possession of the intelligence to cooperate so that somebody can give it to the industry so we can act on it. i know we have former government people on the panel. to me, one the biggest problems in the intelligence area is getting cooperation among the government agencies to get the intelligence together in a timely fashion to get to the industry. it's not just good enough, i don't think, to say we need the intelligence. how do we get it? >> steve, one the things that we did on our working groups, it's

ultimately chaired by secretary napolitano, we made the point. there is an issue of government sharing information, critical information, the private sector. but the throughout of the -- truth of the matter is, they aren't sharing information amongst themselves. sometimes tsa won't have the information that we need. we looked at tsa. why didn't you give us the information. we didn't have it. that's the truth of the matter. one the things that came out of our group on cargo security was i asked the government officialed that were there, you know, i said when 10-28 happened, i didn't get a call. i learned about it from the newspaper or on the news. i didn't get a call and said you need to be looking out nor. he said the packageses weren't going to be on atlas air. i said, yeah, but i had a jet on the ground in dubai that was

loading cargo. and it wasn't loading express cargo. how do you know and how do i know that this wasn't a to use a term, the spectacular events where they were using multiple types of explosives in multiple modes where they aren't maybe all in heavy lift cargo. it would have been nice for us to know that. so the exchange of information wasn't necessarily in the hands of the people that could tell me that maybe would have told me. it never got transmitted to them, and it definitely didn't get transmitted to me. steve is right. we made a big point of it. there's not the sharing information of the government. they talk about the sharing information. but it doesn't happen. some are good and some aren't so good. a lot of it is protection. there's only a certain amount of people that know the information that we need.

they want to protect the sources, they want to protect their sovereignty, so to speak. we have to get open. we are not trying to solve crimes anybody and convict people in court. we are trying to stop catastrophic events where lives are lost, airline employees are lost. >> as a reporter, this is an ongoing story that has not changed for the entire 40 years. >> i want to thank to the idea that there's not information sharing. there has been in my last ten years of my service as part of the tsa and secret service and u.s. customs and border protection, there was a realization that we needed to break down the stove pipes that had been created over years. and there's a tremendous effort,

on going effort to deal with this problem. but it's not whether -- it's not sharing information. it's controlling it once you've shared it. and the aspen'ses that that information is not going to -- i mean we could all turn to wikileaks and know everything. with respect to information. but it's how you control the information once it gets out of your particular, you know, agency. and that's -- this is a very challenging issue to deal with. i'm not suggesting that it's not something ha needs to have a tremendous amount of work. but it's not so simple to say we need to pick up the phone and call the cargo guys and give them all of the information that we have. we don't know where that's going to go. you were in law enforcement, you know, -- i just think it's a bigger challenge and but there's more going on in this area than

a lot of people realize. >> you know, i don't hear the two of you says much different. i mean you are saying this happens and something needs to be done. you are saying there's a reason. >> there's different solutions for both problems. there's to secretary napolitano's working group, we take the security and give them top secret clearance. if you are still uncomfortable, then let's give them a course in handling sensitive and classified information. give them a course in how to sanitize the information. most of them know it with the

prior. i understand that concerns. i was on that side of the road for 32 years. i understand source protection and i understand sensitivity to it. but at the end of the day, at the end of the day, if you don't share the information, someone is going to die. what's more important here? a life, or the information? at the end of the day? >> okay. and your response? >> yeah, there's issues that i see. so i want to make sure that we distinguish between information and intelligence. because intelligence is a different animal than information is. and intelligence collection and information -- rather distribution for a response and information design. intelligence is a entirely different animal. i would suggest if you are going to go top secret, you can't stop there. you are going to have to go sbi to get it. so keep those two separate,

think about it in terms of information that moves rapid once you know it, so that you can move it, and it is distinguished to get it out there for the operators or the industry in times react the way they need to. because they do need to respond. because the government can't respond to what gary is talking about. there's no way they can sent the agency in the ceiling say in dubai or the foreign courts. intelligence is a whole different world of classification. how you move intelligence will be different. information has to move very fast, very rapidly to get to those that need it. >> i see carol coming up to the podium. was there any reaction to what was just said? >> i agree with both of you. >> fine. we could go on for another hour or two. >> before you end this, don, i would like to make a comment. because at the time of 9/11, at the end of the day, the hea came

together and with the faa we worked all night and we came up with the new safety regulations that would allow the airlines to fly again. and there was a complete and total sharing of information. and we knew the level of trust whether the people had security clearance or not, the information had to be shared and it was. that's what got us through that first hurdle. then the idea and the notion of creationing a tsa came agent. and when that happened, much to the disbelief of the ata and the airlines, they were not included in all of the sessions that were created to come up with the plan for tsa. and it was because they entrust us. we really got past that. then we had a variety of

meetings and as it turns out, only those of us with a clearance would be in on the meetings. which meant the ceos of the airlines who were directly impacted could not participate in those meetings. and we got around that for the most part. that's never completely changed. and i think what gary says and what ralph says are both accurate, but i still see a need to have better communication about sensitive information that does require a clearance. all of the security guys have those clearances. if you are going to share the information with airlines, passenger airlines, then you should certainly be sharing it with the cargo people as well. if we just -- i think, gary, what you are doing is absolutely correct. you are working with the secretary and i believe that this is such an important issue that has to be resolved for the

long term. because there is always going to be that hesitancy to share information that could be life threatening if we're not careful about it. so with that, i think this is has been a fabulous panel. everybody really has learned from it. don, great moderator. but the panel was fabulous. thank you. [applause] [applause] >> we still have a great audience. and everyone has been waiting for our final speaker of the day. and i'm so glad there are still so many people here and, of course, i know you are going to stay after nick is finished because there is going to be that drawings. now i want to just say a few things about nick because it is really a pleasure for me to introduce him having once served as the president and ceo of ata.

what i really think is interesting is the article that i read and the bio that i read of nick in which it said that "the new york times" had called him the forceful broker. well, -- excuse me -- a forceful broker is someone who gets things done. and i think that the selection of nick with his phenomenon background in working in the industry and the bank are really going to make the skills to be able to confront some of the tough issues that are out there facing the airline industry today. so with that said, i am delighted to be able to introduce the president and ceo of the air transport

association, nick calio. >> i want to thank you for that kind welcome. i also want to thank you for all of the help that you've provided me. there are a lot of people that i want to thank for the gracious welcome that i've been afforded, from my colleagues to the board to the heads of other trade association like marian and greg fuller, and as well as the secretary ray lahood, have gone out of the way to help me use my learning curve. here's the thing about going last, forget the throw away line about standing between you and cocktails. that's true, i am. in this case, a lot of what i'm going to say has been said. you've all been around, the issues has been around. my three board members, dave, doug, and dave, along with allen were joking earlier at lunch

that i should be on their panel because i was doing to say everything they were going to say. i thought in the interest of time what i might do is just spend a few minutes on my early childhood. then we'll go get that drink [laughter] >> well, i'm not going to talk about my early childhood. i will note that i took my first airplane trip when i was 16. air travel has changed a lot. each one of my three children flew by the time they were six months old and have flown repeatedly. now to the point, those made already and some hopefully not, i have to confess with the tenure of just over 100 days in this job, when i saw the agenda and my topic and going last, aviation in the next ten years, i thought that seemed a little bit more than mildly

presumptuous. then i thought about it more and i thought you don't need to be a lifetime expert to assess the state and implications for the next ten years. what is needed is the passion of the acceptment of the facts and the strong and weak points of the industry from a business perspective. in makes that assessment, my overall observation and what i'd like to discuss with you today is that airlines are on an inflection point. we sheriff -- we have a confront of conditions from want and confess, and scrutiny at worse. we can continue that course under the economy and country and suffer the consequences. or we can take practical positive steps based on what actually is my view the urgency

and opportunity of this inflection point. and then we can regain and position our country that's held as a global leader in aviation. the strength of the airline industry are pretty clear. tom and many of the other speakers hit on it. they drive over 11 million jobs. for every 100 airlines jobs, some 388 are supported outside the industry. still the airlines can contribute even more if we are stronger. a fact that was brought home to me on a recent flight back from phoenix earlier this month. just before take off, the captain thanked everybody on the plane for their business and said that his airline had not been profitable for four quarters in a row because of people like us. because of that, the airline was able to bring back 80 pilots and 200 flight attendants. pretty remarkable story.

and smart pilot. airline industry is helped by global commerce. business is a contact sport. in my worlds, face to face. and aviation is the physical internet. it lets aviation, and enables the really conducttivity. it does, it permits fast, efficient access to global markets and overnight delivery. your companies cannot be doing business in asia, europe, lath tan america, middle east without aviation. in my previous job, you might question why i wanted to do this, i could not have had meetings istanbul. and the airline thrives today and couldn't without the cargo and delivery services. if you look at evidence, it's clear we are not only flying

people more safely. we are the safest form of travel. we're also flying more reliably to more places and with less impact on the environment. and we're doing so at a price that's far more affordable for the consumer. in realtimes, airfares have dropped 37% since 1993. leisure travel is able to the general public on ways that were unimaginable when i took my first flight. it's so affordable and general right now, much of the public thinks it takes air travel for granted, or views it as a right. the growth in air traffic by the general public has been remarkable. at the same time, the airlines continues to operate in the business environment. look at the last ten years. also things you know. the tax of september 11th, 2001, shut down the air system when airlines were already in financial trouble. since then, the industry has lost 55 billion and 160,000

jobs. and as many people remarked today, these are good jobs. and they have been lost. tickets were not priced to cover cost and all of other services included. we faced every imaginable external challenge, including the global recession, pandemics, eruption, and skyrocketing fuel prices. and, of course, there's always the weather. you know, as a frequent flier, even before i took this job, i was always amazed at people who could get angry because airlines would not fly into bad weather. i don't know if you saw the news, but they were at national airport because they couldn't get the planes out, they were stuck on the tarmac, people were complaining, guess who's fault it was. the airlines. now at the same time, perhaps more importantly though, the tax and regulatory burden on flying has grown expotentially. in the last ten years, the

industry tax burden has nearly tripled to nearly 17 billion. this is a bad number. this is a penalty by any standard. but juxtaposition to the profit. last year was a good year for the industry. roughly at 2% profit margin. with jet fuel exceeding $135 a barrel, it was $45 a barrel ten years this month. any projected profitability is threatened in 2011, as is our ability to reinvest in product and service growth. the industry faces massive amounts of reporting requirements and potentially be more. some 30 years after congress decided, supposedly, tend to economic regulation of the airline industry. the industry is too often treated like a utility, not a business. which i think doug parker

commented on earlier. it goes from the supply to the ridiculous. is there any other industry that reports monthly related to service? when was the last time you read in "usa today" about complaints filed in subway or amtrak riders? or for that matter, how many time the cable service went out by month listed by provider. ask my wife if she'd like to see that one. on a serious note, some of the more proposed regulations, such as pilot flight and training specifically, are particularly worrisome. they are not based on science, and will not meet the stated objective of improving safety. probably the best example of the worst type of poorly crafted legislation. we all know what would be woulde constructive to the industry is to adjust. we give great credit to mr. babbitt and the effort he's giving.

when we were looking earlier at the flight simulator, what can we do to compress the timeline. that's a key question. in the face of all of the challenges, airlines have built the models with the lowest cost. they have made painful cuts, produced a man's capacity, and in a sense, even their own capital and young by deferring investments, they needed to stay internationally. with all that have, they still have not been able to maintain a profit. i suppose it's easy to take the industry for granted and the situation for granted given there's usually an airline at the airport given there's 41 bankrupts in the last ten years. however, this instability is hardly supportive of an industry that's so vital to connecting the united states and the global economy today. this industry is going to be even more critical in the next ten years as the global economy becomes more dynamic and competitive with the majority of

growth coming outside of our borders. something that we addressed, i thought, remarkably well at lunch. right now there's not a single u.s. passenger carrier that ranked from the top five in market cap. instead, there are three chinese carriers, south american carrier, and european carrier, in many other countries, aviation is viewed as treated as a strategic asset and vehicle for growth. a fundamental part-plan to promote the domestic economy in jobs. in practice, that is more often than not the case in in country. what's been really interesting to me is that the government has long recognized the need for change in the industry. congress assigned d.o.t., the statutory objective to promote a viable, globally competition, and known transport industry. four celebrate commissioner started in 1993 has been set up

by democracy and republican administrations alike to develop policy recommendation to strengthen the industry. each of these commissions consistented of a broad panel, air force, labor, and academia. after the issues that have issued, have remained largely the same and been discussed in remarkably similar language. over and over again. i know that c.a.halo had to leave. he was telling me earlier about cleaning out his desk last month. we found a bunch of speaking from all of the major airline ceos from the early 1990s. he said i could take them and put my name on them. i'm looking forward to seeing them. but that says something. i've always been struck by the fact that each one the permissions address the rise in tax burden, produce the regulatory burden, expedite

implementation, and enable the industry to attract investments. the work has been done. on paper. these airline commissions are given us a blueprint for ensuring a consistently profitable, globally competitive airline industry. most recently, secretary lahood produced a great body of work that outlines the components needed. and as secretary lahood has said, the work can't sit on the shelf. so the question is how and when do we turn aspiration into measurable action and result? ata thinks the answer is to build on the work already done and turn it into a comprehensive u.s. national airline policy. when i talked about an national airline policy, a fellow panelist called me out up.

one that i should be talking about, and two that the work, the policy, has been done already by one the commissions. as to point one, i am specifically talking about airlines. because we are surrounded by stronger players in the aviation. ask a second point, a policy, written or paper, but not put into practice are no policy at all. we agree the recommendations are there. we need a clear path forward to implementation and funding that is necessary. funding that is currently available ought to be beneficial. for example, it should be funded and approve the business case for the private sector to sunday

nextgen. at the same time, we have to remove and review unnecessary operations. d.o.t. has that opportunity and the regulatory view it's untaken, at ata we have a project reviewing that. we are taking it very seriously. we hope that everyone does, because it would be a step forward, a measurable step in something that needs to be done. we also think the department of justice should continue to adapt policy by allowing further consolidation of networks. we were encouraged by the quick clearance of the southwest merger yesterday. we think they should continue to support antitrust, and we think the restrictions have been removed or certainly relaxed. airlines have to be able to operate again like other businesses. that requires governments to do it's part to connect across america as well as connecting the u.s. to global markets. we've already missed some key opportunities. you know what they are. and frankly, the airline

industry bears a lot of responsibility ourselves for too often failing to advance a clearly focused and industry wide position. that needs to change and it's going to change. we need to focus and coordinated advocacy plan and a commitment from everyone involved to turn recommendations into a real life policy. a realistic fight plan that holds us all to the measurable timelines on better labor management and other things. doing so will benefit all of the streak -- all of the stakeholders, employees, businesses, and customer that is we serve. ata is committed to the work plan that turns aspirations into reality at a faster pace and work cooperatively with any willing partner. this industry is just too critical to american jobs, our economy, and the country's global competitiveness to do anything less. thank you. [applause]

[applause] >> do you have questions for nick? it was those drinks and those tickets, nick. >> perfect. >> going. speak now or forever hold your peace. well, let's give nick another big round of applause. [applause] [applause] >> nick, that was terrific. and i'm going to speak as i go back down. i don't want to forget all of the names of the sponsors that i would like to recognize, because i am now going to take the liberty of being the person that stands between those drinks and those tickets and you. again, nick, that was just wonderful. it's been a great day. i'm delighted to see so many of you still here. there are a couple o