Good afternoon. Before I begin my remarks, I would like to thank Gordon and the Board of Governors of the Wings Club for the opportunity to speak before you today as a representative of the 55,000-member Air Line Pilots Association.

All of us in this room are intimately familiar with the concept or goal of "seamless" passenger air travel.

Airline systems and alliances, both domestic and international, composed of a wide variety of individual companies, attempt to provide the customer with a "seamless" travel experience from reservations and check-in to connecting flights all the way to baggage claim.

"Seamless" implies no bumps, or worse, gaps through which our customers may fall.

Billions of private sector dollars and millions of man-hours have been spent by dedicated and skilled airline professionals building, designing and restructuring these extremely competitive systems.

However, all of us gathered here today who collectively represent "the airline industry" have not experienced a seamless transition in the public consciousness from the quasi-public utility industry of pre-1978 to our present situation.

All of us together – managements, unions, manufacturers and suppliers – have fallen through the wide gap separating the pre-1978 world of regulation to the new world we envision but cannot hope to obtain in our present circumstances.

Trapped as we are halfway between the free-market efficiency the public wants and the regulated public utility they miss.

For example, this industry – which operates with razor-thin margins – is constantly taxed like a cash cow.

Yet, to add insult to injury, the taxes levied for the Aviation Trust Fund can’t be budgeted for aviation because they are supposedly going to save Social Security, allow a larger tax cut for non-aviation interests and find a cure for the common cold -- all at the same time.

This industry, which is the engine for the world’s largest business which is , of course, travel and tourism, watches in disbelief as Costa Rican bananas are worthy of a major trade dispute, but hush-kitted aircraft are not.

How did we arrive at this sorry state of affairs?

Why is this industry in danger of coming apart at the seams, rather than fulfilling its promise of providing the most efficient, seamless air service for our citizens?

Over the next few minutes I’ll try to provide a few answers for these questions, and outline ALPA’s views on long-term, tangible solutions that will help assure that all of us who refer to the airline industry as "our industry," can have reason to hope for "our industry’s" growth and prosperity for all its stakeholders.

I would first like to talk about our domestic infrastructure … a rich fabric that is, indeed, close to coming apart at the seams because of capacity overload, other inefficiencies and the on-going "tug-of-war" between government regulators and industry over control of various components of the air transport system.

Let me begin with a quote by the scientist Richard Feynman: "For a successful technology, reality must take precedence over public relations, for nature cannot be fooled."

There is perhaps no other industry in which reality can be less fooled than air transportation. For, either we build an infrastructure that permits the free market to operate as envisioned by deregulation or we face the consequences.

And, one consequence is that politicians and bureaucrats, rather than the market, determine who gets what service and at what price.

One example is DOT’s proposed competition guidelines, an unworkable and illogical set of rules that could undermine, rather than advance, consumer welfare. Another is the slot exemption process, established by Congress and administered by the Department of Transportation.

The slot exemption procedures, almost by definition, can result in less than maximum economic use of a valued public resource, and, in ALPA’s view, skew competition. Only certain carriers can apply for these exemptions, and only certain markets can be served.

In other words, politics determine the carrier and the service. And, at the extreme, we find ourselves dealing with such overt contortions of the exemption rule as the recent decision to grant a single carrier 75 slot exemptions.

Now, I must emphasize that I’m not saying that the cities this particular carrier wants to serve don’t deserve this service. I’m not saying the carrier in question doesn’t deserve the opportunity to try to provide this service.

What I am saying, however, is the slot exemption process is intrinsically at odds with the concept of a competitive air transportation system. The government – not the competitive forces of the market – has direct control over which carriers gain new slots. And, many carriers that would like to add service at slot-constrained airports are prohibited from even applying to do so … to the benefit of only a select few.

To promote true, open competition in the airline industry, immediate steps must be taken to develop and enhance our domestic infrastructure to accommodate the services all carriers wish to provide.

In this regard, the first issue that must be addressed is maximizing the use of the national airspace system, or NAS. The inefficiencies and capacity-related problems of the NAS infrastructure have, at times, created a nightmare in the skies … and on the concrete … for passengers, flight crew, air traffic controllers and other involved parties … at great cost to the airlines and the general economy.

The outward expansion of our industry, without the proper investments in, and attention to, the long-term, future requirements of the NAS infrastructure, is causing increasingly widespread gridlock, groundlock and safety concerns.

In short, ladies and gentlemen, the U.S. air transport system is operating at full capacity and about to burst at the seams.

The tag line from the movie "Field of Dreams" was "Build it and they will come." If there was an ATC 2000 movie, the tag line should be "Build it, we're already here!"

The time is now to work to put an end to the unacceptable number of flight delays and related flight crew and passenger frustrations, and to address growing concerns about system safety. The time is now to develop real and workable solutions on how to best use our finite resource of airspace to accommodate the projected rising demands of system users.

Rising demands, coupled with an infrastructure in desperate need of modernization, are causing widespread flight delays, which are – according to the FAA – 22 percent higher year-to-date than the same period in 1998.

These flight delays are not only causing frustrations on behalf of passengers and crew; they are costing the airline industry money … a tremendous sum of money, in fact.

Gordon (Bethune): You remember your recent speech at the Global Summit on International Aviation Infrastructure in Washington? During your talk, you said passenger delays each year are costing the U.S. economy a staggering $4 billion a year.

I think this figure speaks for itself in describing the severity of the problem we face.

This delay problem is not going to go away on its own, and will likely worsen if the projections on passenger and shipper demands are proven true in the course of time. Demands are expected to continue to escalate in the years ahead, as the number of passengers carried by U.S. scheduled domestic carriers is projected to jump from 555 million to 828 million in 2010. Freight express revenue ton miles are also projected to almost double from 11.74 billion last year to 22.62 billion in 2010.

For any infrastructure development program to be successful, it must be a joint initiative between industry and the government. And, for any infrastructure development program to be successful, it must be considered a long-term proposition, requiring long-term investments.

The recent work of RTCA, Inc. – a private, not-for-profit corporation that develops consensus-based recommendations on a wide variety of aviation system issues – and the FAA/Industry Free Flight Partnership shows the power of this industry/government consensus. The Free Flight Partnership, for example, has proven that industry and government can work together to manage and implement a functional airspace modernization program.

For those of you in the audience unfamiliar with the concept of Free Flight, its sum and substance is allowing pilots to determine their own optimum flight profiles … whenever feasible and whenever safe. Implementation of initiatives based on this concept is expected to cut user costs, improve airspace flexibility and remove some flight restrictions.

Phase 1 of the Free Flight Partnership’s recommendations is now being implemented, and plans are underway to deploy these enhancements system-wide, including procedures using satellite navigation and aircraft precision navigation and automation capabilities.

The National Airspace System Architecture – driven by the Free Flight concept, developed by the industry/government partnership – provides a roadmap to modernizing and improving the entire air transport system through 2015. This architecture identifies specific needs in communications, navigation, surveillance, aviation weather and avionics, and provides new systems to enhance user capabilities and services in the defined areas.

It’s the closest we’ve ever come to defining a NAS architecture that is responsive to airport operator and user requirements.

But what good is this if all we do is get airplanes to a congested airport more efficiently? It’s only half of the equation. We also must have more concrete and facilities on the ground. No matter how well the system works in the air, being number 40 in line to take off from some of our busier airports isn’t going to cut it.

To emphasize our commitment to overhauling the U.S. airspace system, ALPA is initiating its own NAS Modernization Initiative. This six-year, massive governmental and public awareness program will focus primarily on generating a guaranteed funding stream for modernizing this national resource.

The first important goal of the ALPA initiative is taking the Aviation Trust Fund off budget to allow funds generated from aviation taxes to finally be used for aviation purposes … as they were intended to be.

Other immediate action items of the ALPA NAS Modernization Initiative include the continued development of a joint industry/government future NAS requirements document and a NAS architecture responsive to user requirements.

In leading this effort, ALPA is helping to encourage basic research into air traffic management tools by government agencies, such as NASA. New and improved tools are needed to provide controllers, planners and operators more complete, real-time information about air traffic and flight operations.

Development of air traffic management tools is an immediate urgency, as the lag time between development and implementation can be as long as 20 years. In fact, the development of procedures and tools being deployed today began in the 1970s.

In the medium term, ALPA will work to ensure that the National Civil Aviation Review Commission’s report on funding and aviation safety is considered in the modernization plan. And, another specific priority in the medium term will be to guarantee that FAA establishes a performance-based ATC organization and that airport capital development needs are met.

ALPA’s NAS Modernization Initiative will also center on strengthening and maintaining the critical industry consensus essential for success, and ensuring line pilot input in the modernization effort.

I cannot emphasize enough that it is absolutely imperative that we initiate real NAS modernization immediately. Decisions now being made, and budget actions now being taken, will directly affect the ability of the FAA to meet the timelines dictated by the NAS Architecture.

I would now like to shift gears and say a couple of words about the infrastructure that applies to international air transport services … specifically about the regulatory infrastructure – a carefully woven fabric of bilateral air service agreements that protect our investments in our air carriers and the jobs of some 865 thousand aerospace workers here in the U.S.

This subject is timely now because the World Trade Organization will be holding a ministerial conference in Seattle early next month to initiate the next round of negotiations about the embrace of the General Agreement on Trade in Services, or GATS.

Currently air traffic rights and, to a large extent, related services are excluded from GATS coverage. It is ALPA’s view that they should continue to be excluded.

The GATS is simply an unsuitable framework for air transport.

Full application of GATS’ principles would require the U.S. to open up its air transport markets to other countries on a most-favored nation basis. Because the U.S. has liberal agreements with several countries, we would have to provide full access to our international air transportation markets – even to countries that may not have to reciprocate.

Also, the U.S. would have to give foreign carriers access to our domestic market even though that market dwarfs any other domestic market and, in fact, is essentially as large as all other domestic markets combined.

One question on international air transportation that ALPA hears quite frequently is: "Why should air transport be treated any differently than any other business?"

First, airlines have historically been integral parts of the national security infrastructure. Second, they have been equally integral to national economies, often providing service that might not otherwise be offered.

It is for these two reasons that almost every country regulates the ownership and control of its airlines. While somewhat diminished, these reasons still retain considerable force. In the United States, it was just this decade that we saw civilian commercial aircraft provide a significant portion of the lift in support of the U.S. operations in a major military campaign.

And abroad, government ownership of airlines remains pervasive. Dozens of the world’s major carriers – in fact, the large majority of major carriers outside the U.S. – remain government controlled, and efforts to privatize often move haltingly.

Two weeks ago, Iberia announced that its privatization may be postponed indefinitely because of market uncertainties and Belgium announced that it would retain a blocking interest in Sabena "to protect the national interest." Just a week before that, subsequent to Lufthansa’s proposal to acquire British Midlands, British Airways Chief Executive Bob Ayling compared Lufthansa’s challenge to British Airways to the battle for control of the skies between the RAF and the Luftwaffe, and pointedly asked whether the U.K. wanted "national champions" or not.

In this regard, foreign government involvement in the airline business causes concerns for labor. Pilots have seen the portion of transatlantic flying done by European carriers increase steadily as alliances have developed even though U.S. carriers have lower unit costs.

This is not the result one would expect if market forces alone were determining the allocation of flying.

This latter point leads us to a third area where air transportation is different from other industries. Aircraft are mobile workplaces that move across international borders. Daimler can’t pick up an assembly plant and move it, employees and all, to the United States. But Lufthansa can, and does, fly its airplanes here – crew and all – everyday. Crew concerns about labor issues, in regards to international alliances, must be addressed as part of any new regulatory regime.

A fourth and perhaps the most important way air transport is different is there is already a separate government administrative structure set up to deal with it.

The professionals at the departments of transportation, state and commerce possess an in-depth understanding of the complexities and needs of the industry and have been persistent and effective at addressing these needs under the current regulatory structure. They have made great progress in achieving new opportunities for U.S. carriers, and there is every reason to believe they will continue to do so. They have identified countries with common interests and have liberalized air transport markets on a case-by-case basis.

In short, the current system is not perfect, however, ALPA believes that abandoning it and substituting GATS would be a mistake.

Finally, I'd like to comment on the domestic systems involving multiple regional codesharing partners as well as the international alliances.

Taken all together, this patchwork quilt of airlines in every instance is theoretically supposed to provide the "seamless" product to our customers.

But at the end of the day, what is the stitching or the glue that makes these customer service systems work?

You know the answer – it's the employees, of course.

Employees form a wide variety of independent companies with different managements, training, tools, equipment, procedures, corporate cultures – not to mention pay and working conditions – are all supposed to magically "get it" and work feverishly for the betterment of a system or an alliance because the company newspaper said we are now a corporate "family" – these are your new brothers and sisters.

Remember the quote from Richard Feynman which I used earlier in my remarks: "Reality must take precedence over public relations, for nature cannot be fooled."

Well, in the airline system or alliance business, reality must take precedence over public relations because the glue – the stitching – that holds your systems together – the employees – can't be fooled either.

It has been said that there are only two emotions that drive all human behavior: "Love and Fear."

The first step in long-term successful domestic system or international alliance building is to remove the "Fear" – not by public relations – but by enforceable contracts that solve real problems.

Junior narrow-body first officers at major airlines fear for their job security. It's hardly an unfounded fear. As recently as a few years ago, Delta had 700 pilots on furlough, American 500, and USAirways over 200 – while their regional codesharing partners were growing by leaps and bounds.

Regional pilots fear their career expectations have artificial glass ceilings.

These are two problems of fear, crying out for the same solution.

They are your employees – they are my union members. Let's work together to remove the fear. You can't have a seamless customer system without a seamless employee system. The laws of public relations say you can – the laws of real world labor relations, which take precedence, say you can't.

Let's deal with the reality and negotiate constructive agreements that build networks, that provide career progression for regional pilots in your system as well as job security for junior pilots at the mainline.

We can do both and provide a network cost per ASM that makes sense to all of us.

The international alliance field provides additional labor challenges to a seamless network – but the key to success remains the same. Job # 1 is to remove the fear.

Employee job security fears I have already dealt with. There is another growing public fear in international aviation that must be addressed. Fear about safety of alliance partners. The October issue of Orient Aviation, the magazine of the Association of Asia/Pacific Airlines, declared on its cover that Asia was at the bottom of the safety league. According to their study, almost one out of three fatalities in the 1990s were on Asian carriers.

Africa and South America didn't fare much better.

It is misleading to say that international alliances are formed only because of market access problems. Look at U.S. air carrier service to Korea five years ago and look at it today. The U.S. carriers were forced to abandon a relatively open market because of unsustainable losses due to ridiculous pricing.

An alliance without seamless safety will not and should not be supported by the traveling public.

In conclusion, management and labor must work more closely than ever before to ensure that the government provides an infrastructure to support a safe, successful, fully competitive, free market airline industry that is bursting at the seams.

We must remove the employee's reasons for fear of airline systems to ensure "seamlessness" isn't just a public relations slogan, but a consumer reality.

We must, to paraphrase Robert Kennedy, be aviation leaders whether in management or labor – "Who are not simply willing to see things as they are and ask why, but rather leaders who dream of things that never were and as why not?"

Thank you.

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