During the “Are You Exposed” session this afternoon, Dom Nessi, Deputy Executive Director/Chief Information Officer of Los Angeles World Airports, provided compelling – and often frightening- information about how vulnerable today’s IT systems can be.  Airports are vulnerable to attacks to our network or wireless network, baggage systems and websites. Nessi noted the particular risk posed by the widespread use of USB sticks, where 10 percent are infected with a virus. I actually felt a bit vindicated when he also emphasized that smartphones aren’t so smart when it comes to malware, with the rapid roll out of new technology being too quick for current security standards, resulting in more and more breaches.

Nessi also covered an entirely new challenge for airports as they receive service from “eEnabled aircraft”, such as the Boeing 787 and Airbus 380. Emphasizing that “this is going to be a major new frontier”, he talked about the impact that an airport network being hacked could have on such sophisticated aircraft. I found it fascinating and a bit comforting that airlines operating the A380 keep a “sealed CD” so they can reload the necessary software inflight in the event of a catastrophic failure.

Michael Kalt, an attorney with San Diego based Wilson Turner Kosmo, addressed the exposure businesses face with the ever changing and expanding world of social media. When the question was posed “Can you disciple an employee because of comments made using social media?”, the answer was a definitive maybe. That is because so much depends on the individual circumstances, what is in your company policy and the applicable state as well as evolving federal law. The best defense is to stay informed and ensure your policy is up to date and reasonable. You can’t just say no, given the important role social media plays in most people’s lives.  (But not mine…)

The session was very educational in providing valuable information about cutting edge challenges airports face. Also, I learned a new term so I can better communicate with both the cool tech kids and the informed HR directors – “dooced”.   Never heard it?  Well, the Urban Dictionary defines “dooced” as to lose one’s job because of one’s website.  I can’t wait to use it the next time I play Scrabble- which I still play the old fashioned way; not on a computer!

Bannard also highlighted the urgent need for legislative remedies that will enable airports to limit the disclosure of the data and protect those involved from excessive liability exposure.  ACI-NA has been actively pursuing such legislation in Washington.

Our panelists:

• Francine Kerner, Chief Counsel, Transportation Security Administration, a frequent guest speaker at ACI-NA’s Legal Committee meetings;
• Joanne M. Halley Office of Associate Chief Counsel, U.S. Customs and Border Protection, Los Angeles Office;
• Professor Chris Guzelian, who teaches Constitutional Law at Thomas Jefferson School of Law in San Diego.

The title of the session is fairly comprehensive in explaining what the panelists will be discussing. In addition to a discussion of these issues from a TSA security checkpoint perspective, we will also have the opportunity to compare and contrast how Customs and Border Protection operations addresses these issues. We will also have an academic perspective on Constitutional rights of privacy concerning airport security.

Airports Council International – North America (ACI-NA) has submitted comments in response to the Department of Transportation’s (DOT) Notice on its grant of the joint petition of Delta Air Lines’ and US Airways’ slot swap at Ronald Reagan Washington National Airport (DCA) and New York LaGuardia Airport (LGA).

ACI-NA’s comments stressed that the DOT should not grant the waiver petition set forth in its Notice as it fails to recognize the primary role of local airport proprietors in managing congestion at their airports and seeks unlawfully to impose restrictions on the proprietary rights of the Port Authority of New York and New Jersey and the Metropolitan Washington Airports Authority to control how their facilities at LGA and DCA are used.

“ACI-NA has advocated that slots should be treated as community assets that are used to benefit the airport/community of their location, and not the airlines,” said Principato. “As such, the interests of the operating airport proprietor should be considered in evaluating the treatment of a petition by air carriers for the exchange of slots.”

Principato also noted that airport proprietors have been given adequate market alternatives to resolve capacity constraints under the DOT’s Amended Rates and Charges Policy.

“It is especially important that such market alternatives not be distorted by a system that allows those most responsible for creating congestion problems to achieve even greater economic benefits by being given property rights in new slots that are created at the very airports which their flights caused to become congested,” emphasized Principato.

“The airport proprietors are in the best position to manage the use of the facilities they planned, designed, funded, built and currently operate,” he concluded.

View ACI-NA’s full comments.

We are grateful our nation’s leadership did the right thing and passed the 21st short term FAA extension that returned thousands of people to work.  It is unfortunate that the aviation system suffered a two-week shutdown of FAA and approximately $400 million in lost revenue before it was accomplished.  It is also unfortunate that thousands of FAA personnel and many contractor employees and others associated with delayed projects had their livelihood so adversely impacted.

Tucson Airport

It is absolutely imperative that Congress resolve their differences and pass a long term bill to fund FAA which will keep critical aviation infrastructure projects going and workers employed when they come back from their recess.  The system cannot afford another shutdown.

The impact to Tucson is that Tucson International Airport is awaiting a final grant to begin a $10 million reconstruction project involving its crosswind runway and associated taxiways.  This project has a critical path schedule due to weather and operational constraints.  Further delays in receiving the remaining grant would result in missing the construction window and delaying the project start until next year.  In addition, this project is expected to employ approximately 50 high-paid construction personnel.  At Tucson’s reliever airport, Ryan Airfield, the shutdown has delayed the purchase and installation of emergency standby generators, which will protect the tower, airfield, and landside from disruption of power.  Several planning projects in various stages were shut down due to FAA personnel furloughs.  Additionally, the environmental work that had just begun on a replacement for TUS’ aging Air Traffic Control Tower was suspended.

As we await the summer recess for negotiations to begin again, we ask that Congress consider the losses that have already occurred and come together on a new FAA reauthorization measure that removes the constant uncertainty for long-term operations.

The Furlough…How did it play in Peoria? Pretty poorly!  The recent FAA shutdown places new emphasis on the need for stable funding for the FAA over a multi-year period.  Only with stable funding can disruptions be avoided and planning be accomplished for the capital development of our nation’s air transportation system, from the major hubs right down to the regional airports.

Peoria felt the impact of the shutdown even before it happened.  When the political climate a week before the shutdown looked like a deal would not be reached in time, the first casualty Peoria felt was an interruption of a site selection study for a new air traffic control tower.  Peoria just opened a new terminal building in April, and the old terminal stands in the way of full use of the new building.  The old terminal houses the air traffic control tower, and the building is 52 years old and in bad shape.  We can’t fully demolish the old building until a new tower is constructed.  The old building is costing the airport authority money, with an estimated one third of the airport’s total electrical usage still consumed by the mostly vacated old terminal.

The site selection process for developing a new tower is a three step process.  This process is conducted at the Airways Facilities Tower Integration Lab (AFTIL) at the FAA Tech Center in Atlantic City, NJ.  The first step is a week-long visit to the AFTIL, using a digital model of the airport to select three or four potential sites (we looked at fourteen and narrowed it to four).  The second step is an analysis by FAA engineers of the feasible sites, which can take about 6 months, and then determine the estimated cost at each site.  The final step is a second visit to the AFTIL, which for Peoria was scheduled to take place July 25 – 29.  This visit was cancelled the week prior to the shutdown, because it looked certain that the AFTIL staff would be furloughed.  The estimate at the time of cancellation was that rescheduling would probably not be possible before September.

The FAA shutdown also impacted the Airport Authority’s project to partially demolish the old terminal and renovate the HVAC systems still supporting the FAA tower operation.  We had hoped to take bids to do this work on September 1, after review by FAA staffers in late July or early August.  The furlough has pushed this back to the end of August, because there was no one working at the FAA to review the plans.  This has pushed back our ability to start the project until October, which means that the HVAC renovations will take place during the heating season instead of during milder weather.

An additional impact was felt on PIA’s planned project to rehabilitate the approach ends of Runways 13 and 4, scheduled for FY 2011.  Due to the furlough, no FAA employees were at work in the Chicago Airports District Office to process grant paperwork or to issue new grants.  The impact of the shutdown on this project has put finances in question and will likely delay the start of construction until next year.

Even projects that were not funded by FAA were impacted by the shutdown.  The Air National Guard has had a presence on the Peoria International Airport since just after World War II.  One older portion of the old base had an area contaminated with petroleum products and the ANG has funded a project to remove contaminated soil and replace it with clean fill.  Just before the shutdown, the Guard contacted the Airport Authority about a new, more efficient way to bring trucks on and off the site.  This new routing was not in the original plans and might require a new airspace determination from the ADO.  Since there was no one at work to ask the question, the contractor has had to delay the start of earthmoving.  This delay may push the project into next year, with uncertain consequences.

Even a shutdown of only two weeks has had a very significant negative impact on the Peoria International Airport, costing us significant local dollars that won’t be replaced by any grants.  My hat is off to Secretary of Transportation Ray LaHood for his constant drumbeat of support for getting Congress to extend the FAA’s authorization, and his support of long term FAA funding.  Only with stability and assured multi-year funding mechanisms will our industry be able to resume planning for capital development programs and financing.

Brad Penrod, Executive Director/CEO

The impact on PIT of the FAA shutdown was the postponement of the rehabilitation of RWY 10C-28C that was estimated at $8.4 million.  This project, which included improvements and suggestions from many sectors of the aviation community, FAA, flight crews, Airport Authority Maintenance, Engineering and Operations professionals, was agreed by all, including the airlines, to be the critical project for the year.

For an $8.4 million project, estimated to last six months, and assuming an “average” salary of all direct and indirect labor involved, including all overhead and benefits of $80K or $40K for 6 months, means $8.4MM / $40K = 210 jobs or  approximately 100 direct jobs and 100 indirect jobs were potentially impacted by the delay or possible cancellation of the project.

At the Allegheny County Airport, there is a significant corporate tenant that was scheduled to start a multi-million dollar renovation to their hangar, which has some historic significance to the airport.  The FAA had received the required documentation requesting the work be approved, but due to the shutdown the FAA review was unable to proceed as planned, thus costing delays and the loss of approximately 50 construction jobs.

We would be so happy to have the freedom to run the business of airports like business, along with the required funding that is reviewed on an annual basis with the carriers.  Maybe our Canadian friends have it right!

Oh well, I guess we can always issue new debt…

ACI-NA President Greg Principato

Thank goodness the FAA shutdown is over (for now).  This self-inflicted wound put more than 74,000 people out of work; delayed needed airport infrastructure and safety projects, some until next year’s construction season; and pushed NextGen further into Never NeverGen land.  During the shutdown I often recalled a line I penned for the 1993 report of the National Commission to Ensure a Strong Competitive Airline Industry, that aviation is the only industry whose day-to-day efficiency is capped by the day-to-day efficiency of the federal government.  This reality has never been clearer than it is right now.

The shutdown was the culmination of four years of temporary extensions during which the Airport Improvement Program lurched forward in spurts leaving the FAA unable to release needed grant money in a timely way, resulting in delayed and cancelled projects.  Add to that the impact of the financial crisis on the market for airport bonds, the expiration of the AMT waiver for public purpose bonds and now the U.S.  government’s credit downgrade which is likely to raise borrowing costs for airports.  The federal government’s…ahem…inefficiency, means that investment in aviation infrastructure in this country is being impeded, even reduced.  This at a time when our competitors around the world are moving in the opposite direction.

And all because the nation’s airports operate under an onerous, Nixon-era, regulatory framework dominated by federal influence.  The financial regulatory framework under which airports operate dates from the days when the federal government told the airlines where to fly and how much to charge, and   when someone actually thought wage and price controls were a good idea.   The events of these past couple of weeks demonstrate just how stupid that is.

It would be funny if it wasn’t so sad.  In their “Falling Apart and Falling Behind” report, Building America’s Future noted that The World Economic Forum ranks U.S. air transport infrastructure 32nd in the world, behind countries like Panama, Chile, and Malaysia.

Liberals in our country argue for more investment in infrastructure.  Tea Party conservatives argue for less interference from Washington in our economic lives.  The way airports must operate satisfies neither, we have declining investment and way too much federal involvement.  But we have a solution that can satisfy both – get the federal government out of the business of limiting how airports can raise and spend resources to meet their needs.  The federal government tells airports they can charge only a limited user fee and limits how it can be spent.  Yet, this is the very mechanism used around much of the world.  The current system makes airports of all sizes too dependent on federal funds, which are raised by the very ticket tax that temporarily expired when the FAA shut down.  Give airports the option to determine their own user fee, and how to use those funds.  Market forces will ensure the fee is sustainable; no community will want to charge a fee so high it will lose air service.  By doing so, we can take another look at the current tax and grant program and make adjustments to both.

If we do this, we will remove federal domination of airport finance and infrastructure investment, assuring more local control.  We can promote additional, needed improvements in infrastructure and keep our edge in this increasingly global industry.  We can reduce federal spending and taxes, better focusing both on critical needs going forward such as truly building a next generation ATC system, and providing resources in smaller communities that may continue to need assistance.

This type of system would benefit our country, our economy, passengers and, I would argue, the airlines.  In fact, that is why airlines around the world have argued for such an approach; U.S. carriers are the last holdouts.  The FAA shutdown should provide all the evidence we need that we cannot continue to shackle airports’ ability to finance needed projects.  Anyone who cannot see that probably can’t see the “E” at the top of an eye chart.  Or maybe doesn’t want to open their eyes to reality.

Gina Marie Lindsey, Executive Director, Los Angeles World Airports

When I spoke at a luncheon of the Aero Club of Washington two weeks ago, I spoke about the great work we’re doing to improve LAX, as well as the looming failure of our nation’s system for funding aviation infrastructure.  Three days later, Congress underlined my woeful prediction by failing to take care of the simplest of needs, failing to take an action that it managed to do twenty times since 2007 and failing to pass an extension of FAA authorization.

I would like to applaud Senator Barbara Boxer for being a champion for airports on the Senate floor and asking her colleagues to do what was simple and necessary – approving a clean extension of the FAA authorization bill.  I’d also like to thank the Senator for hosting a conference call last week with a large number of aviation stakeholders to learn how this impacts the nation on many levels.  Federal employees were not working, contractors were shut down, and revenues for aviation infrastructure were being waived off to the tune of $200 million per week.

In Los Angeles, construction work proceeded as planned, but the shutdown presented challenges for the airport.  Key FAA employees were furloughed, and we were not able to get resolution of certain regulatory, engineering, and planning issues that were confronting our construction crews.  As the shutdown continued, the situation grew more problematic.  It could have delayed our starting key runway lighting and taxiway projects that are essential safety elements of our construction program.

And it’s not just airport projects that were impacted.  The Los Angeles County Metropolitan Transportation Authority (Metro) is in the final stages of designing its light rail Crenshaw Line.  Because the Crenshaw line crosses the ILS glide slope just outside the airport boundary, Metro has been working with FAA engineers to agree on a design and specifications that will allow Metro to build a light rail line that complies with FAA’s safety requirements.  FAA staff furloughs brought these discussions to a standstill at a key point in Metro’s design process, and this public transit project risked falling off schedule.

While the Senate has now just passed the House extension, it’s clear we will be facing the same seemingly intractable political tensions in mid-September, when the newly passed extension expires…again.  This is the time for airports, airlines, manufacturers and labor interests to collectively craft a new funding structure that is predictable, sustainable and minimizes continued vulnerability to politicizing the core stability of this industry.

The 3 percent withholding provision will require changes in federal regulations as well as state, city, county and municipal regulations, and businesses will need to create new accounting and compliance requirements.  The Coalition has estimated that the compliance costs will be between $75 billion and $15 billion depending on the outcome of the IRS’ implementing regulations.

The House Small Business Subcommittee on Contracting and Workforce is holding a hearing on the subject on this coming on May 26, and ACI-NA is submitting testimony in support of the repeal of this onerous provision.

Gale pointed out that the Philadelphia airport is the 9th busiest airport in the US and the 11th busiest airport in the world.  He mentioned several projects underway at his airport, including a multi-billion dollar airport expansion program, called the Capacity Enhancement Program, which was recently approved by the FAA.  He noted that Philadelphia Airport has been a congested and delayed prone airport for several decades, and the capacity improvement plan should improve airport efficiencies and opportunities for global growth.  He recognized the importance of airports to regional economic growth in most US metropolitan statistical areas, and especially to the Philadelphia region.

Reflective of Gale’s strong sense of humor and wit, he borrowed from a radio contest called “Tabloid Trivia” in concluding remarks with the conference attendees.  He quoted  three newspaper headlines involving lawyers, one of which was actually false, and asked the attendees to identify the false headline by a show of hands.  The false headline was:  “Lawyer Sues Himself.”  None of the conference attendees guessed that one.  Accordingly, the pre-approved contest award of an all-expense travel from Philadelphia to a Caribbean destination of the winner’s choice as long as the trip occurred anytime between April 1 and 13, 2011, went unclaimed!

Conference Lawyers Hear About Community Giving Policies
One of the sessions during the Spring Legal Conference featured an  interactive session moderated by David Mackey, General Counsel of Boston Logan Airport, on legal issues presented by airport attempts to entertain community giving and charitable requests.  First, David Bannard of ACI-NA associate law firm Foley & Lardner presented an overview of the law in the area, including the FAA’s revenue diversion rules and grant assurances the impact airports that received certain federal funds.  Then, Timothy Karaskiewicz, airport attorney for General Mitchell International Airport in Milwaukee and Chairman of the Legal Affairs Steering Group, posing as an airport executive, presented a series of scenarios representative of  requests airports often  receive from charities and other community organizations for airport access, services and/or funds to David Mackey, who acted as CEO of the airport.  Mackey consulted the airport’s attorney, David Bannard, for legal advice on these issues.  The attendees were often asked for their thoughts on the scenarios, and many participated in the interactive session.  It was a great way to learn about the nuances of the law in this area.  It kept all involved and presented the legal concerns in a way that conference attendees will be able to apply in their day to day encounters.

Conference Session on Airport Use and Lease Agreements
Legal Conference attendees received a snapshot understanding of the complex concerns raised in airport use and lease negotiations during a one-hour session on airport use and lease agreements moderated by Emily Neuberger, General Counsel of Detroit Metro Airport, a panel representing airports, airlines and their consultants, including Scott Lewis of ACI-NA law firm Anderson & Kreiger, Amy Weaver, Manager, Properties Department, Southwest Airlines, Marsha Stone, Chief Financial Officer, Indianapolis Airport Authority, Rhona DiCamillo of D & G Consulting Group, and Pam Drenner, Regional Director, Properties, Corporate Real Estate, Delta Air Lines.  Five issues were addressed by these panelists during the session:  rate setting and revenue sharing concerns;  joint use formulas; approaches is dealing with the issue of control of the airport’s capital program; how affiliates are treated in the agreement; and pros and cons of airport consortiums.  The panelists provided a wealth of information to attendees based on their actual experiences in recent airport/airline negotiations.  The interactive nature of the presentation highlighted the complexity of some of the issues, and the creative new approaches being used to satisfy the needs of the airports as well as the airlines in these areas.

During the opening session, City Solicitor Shelley Smith, who manages the city’s 156 lawyers, welcomed the conference attendees to Philadelphia.  She said the Philadelphia International Airport and the Philadelphia law department appreciate the important work done for airports by members of her legal staff under the direction of City Divisional Solicitor Joseph Messina, who is the vice chair of the ACI-NA Legal Affairs Steering Group.  Smith mentioned important airport legal proceedings in which the city has been involved, including recent victories in litigation involving Tinicum Township.  ACI-NA intervened to support the airport in one of those cases, where the Third Circuit Court of Appeals found that neighboring Tinicum township could not impose a tax on takeoffs and landings at the airport, since it neither owned nor operated it.  Ms. Smith expressed appreciation for the gathering of lawyers who will receive information on recent trends in airport legal practice:  spotting issues and practical solutions during the four-day airport legal conference.

We appreciate the city’s law department’s support of the conference not only through the warm welcome from Smith, but also through the participation of members of the law department as speakers during the conference.  Those speakers include:  Joseph Messina during the Litigation Update Session; Brad Bak, deputy city solicitor; and Raquel Guzman, the former city law department attorney and current associate general counsel, Philadelphia Gas Works during the session on utility easements and licenses at airports; and Allyson Davis, assistant city solicitor, during the session on airports and travelers with disabilities.

ACI-NA legal affairs conference attendees will be greeted by the airport’s Chief Executive Officer, Mark Gale this morning.  The airport has also planned a welcoming reception for  conference attendees and their guests at the city’s Pyramid Club this evening.  We look forward to the opportunity to network as we enjoy a panoramic view of the City of Brotherly Love.

David Berg, ATA General Counsel, provided overview of airline fare levels over the past decade noting that fare levels have not kept pace with inflation and airline revenue shortfalls. Although 2010 is showing some recovery for the airlines, he added. He then cited language in the Deregulation Act as a justification for the airlines’ ability to unbundling of fees by airlines. He also provided information showing the percentage of overall revenues attributable to the ancillary fees by each domestic airline. ATA’s position is that the airlines should be allowed to implement ancillary fees without DOT interference. The ATA supports disclosure by the airlines, but only on their websites and through their own distribution systems.

GAO’s Gerald Dillingham noted the GAO issued a report on its study of airlines fees in July.  He explained that the study examined fees collected by the airlines for ancillary services including baggage fees, the impact of the nontaxation of those fees on the airport trust fund, and the types of consumer disclosures provided by domestic airlines for those fees.

He stated that one of GAO’s concerns is that the airlines do not fully disclose the total costs of a trip which has angered and surprised many air travelers. He stated that these fees generated $8 to 9 million in revenues for the airlines in 2009.  He also pointed out their inability to verify the total revenues generated since different airlines report the revenues generated from these fees differently.  GAO has recommended that the airlines be require to fully disclose all fees to purchasing consumers prior to the purchase of tickets. The IRS should be required to impose taxes on these ancillary fees so that the airport trust fund also receives its share of these fees, Dillingham said.

She summarized efforts to promote competition through Open Skies Agreements, mentioning recent agreements with Japan and the second stage agreement with the European Union. The department had recently reviewed requests for antitrust immunity submitted by airline alliances.

Fornarotto discussed the DOJ’s review of the United/Continental merger, and DOT’s coordination on the review of that merger.  Finally, she discussed their work on the essential air service program and reviews of 74 applications for small community air service grants.

TSA Chief Counsel Francine Kerner discussed law enforcement at airports, advanced imaging technologies and handling anomalies identified when a passenger is passing through these screening machines, constitutional issues associated with airport screening, including a passenger’s attempt to exit the screening area after screening of the individual enters the screening process.  She also discussed the role of identity verification of passengers entering the screening area, new technologies under review for airport security, including whisper radios, among others.

She also discussed some legal issues under review with evolving technologies and provided samples of advance images for the audience’s understanding.  She also mentioned recent litigation brought against TSA involving some of the new technology in the Epic case.  Some litigation against TSA raises issues about protecting classified and sensitive information, types of pat downs applied at airports, and issues under review by TSA’s policy shop.

FAA’s Kevin Willis  discussed the Airport Compliance Manual which was revised and reissued in December  and encouraged airports to submit comments as they are planning to issue a final copy within the next several months.  He also discussed recent airport privatization efforts, the recent issuance of the air carrier incentive guidebook, for which he invited the airports to provide comments, and provided come comments on the FAA’s recently issued notice on through-the-fence agreements at general aviation airports.

Last week, the Senate adjourned for August recess after the Appropriations Committee approved 9 of the 12 fiscal year (FY) 2011 appropriations bills, including the Transportation, Housing and Urban Development and Department of Homeland Security bills. Only the Defense, Interior, and Legislative Branch appropriations bills have not been approved by the Senate Committee. Unfortunately, the full Senate has not acted on any of these bills.

The House Appropriations Committee has only approved 2 of the 12 appropriations bills, both of which have also been approved by the full House. The House has passed the FY 2011 Military Construction and Veterans Affairs and the Transportation, Housing and Urban Development Appropriations bill.

Key provisions of the Transportation, Housing and Urban Development bill:

• The Federal Aviation Administration is funded at $16.5 billion, which represents a slight increase over the FY 2010 enacted level.

• The Airport Improvement Program was level funded at $3.5 billion, the same amount appropriated for FY 2010.

• $1.16 billion is specifically slated for NextGen.

• The Facilities and Equipment account receives $3 billion, which is $63 million higher than the FY 2010 enacted level.

• The bill continues to include language that would require airports, as a condition of AIP funding, to post air passenger rights signs in non-revenue generating area at the request of the Department of Transportation.

• The bill does not fund the Small Community Air Service Development Program.

It is becoming increasingly unlikely that Congress will be able to complete its work on all of the appropriations bills before the current fiscal year ends on September 30. There is a general consensus that in September, Congress will need to pass a continuing resolution to ensure funding for the federal government. This will leave the funding of the federal government up to the lame duck Congress, after the mid-term elections in November.