2012 FAA Budget Briefing to Industry May 7, 2012

1. 2012 FAA Budget Briefing to Industry May 7, 2012

2. Thanks to Our Sponsors 2012 FAA Budget Briefing to Industry

3. 2012 FAA Budget Briefing to Industry May 7, 2012

4. Text Message Questions to 571-379-0415

5. Budget challenges: Uncertain outlook Reauthorization levels for FY2013 and FY2014 are below the FY 2012 enacted November elections – expect Continuing Resolution Continued pressure to reduce spending Operational challenges: Balancing the demands of implementing NextGen capabilities while continuing to deliver current services Prioritizing ATO services in a constrained budget environment Current/Future Challenges Moderator: Gary Church, Aviation Management Associates Speakers: Donna McLean,Donna McLean Associates, LLC Nick Stoer, Nicholas Stoer & Associates Gael Sullivan, US Senate Commerce Committee

6. FAA ATO and NextGen Funding and Finance Overview Gary Church May 7, 2012

7. FAA ATO & NextGen Funding and Financing Adequate FAA funding is critical to mission success • Sustain safety • Maintain FAA operations • Develop and deploy NextGen Four major budget accounts support FAA ATO & NextGen • Operations & Maintenance • Facilities & Equipment • Research & Development • Airport and Airways Trust Fund

8. FAA ATO & NextGen Funding and Financing FAA Operations and Maintenance Funding Projected Budget Shortfalls FY2012 $269 M FY2013 $473 M FY2014 $798 M FY2015 $1,137 M O&M 3.8% Average Annual Growth Since 2001 ‡ Actuals *Estimated **Requested ***Projected

9. FAA ATO & NextGen Funding and Financing FAA Facilities & Equipment Projected Budget Shortfalls FY2012 $126 M FY2013 $211 M FY2014 $232 M FY2015 $233 M F&E 1.2% Average Annual Growth Since 2001 ‡ Actuals *Estimated **Requested ***Projected

10. FAA ATO & NextGen Funding and Financing FAA Research & Development Projected Budget Shortfalls FY2012 $7 M FY2013 $19 M FY2014 $20 M FY2015 $21 M R&D 1.5% Average Annual Growth Since 2001 FAA Percentage of ATO & NextGen Budget Expended on Research 1.5% Percentage of US GDP Expended on Research is 2.62% Industrial Companies Budgets Expended on Research is 3.5% High Technology Companies Budgets Expended on Research is 7% ‡ Actuals *Estimated **Requested ***Projected

11. FAA ATO & NextGen Funding and Financing FAA Airport and Airway Trust Fund ‡ Actuals *Estimated based on a 31% General Fund Contribution

12. FAA ATO & NextGen Funding and Financing Traditional Budget Priorities • ATC Operations • Pay, Compensation and Benefits (Retain and Sustain Resources) • Sustain Infrastructure with Service Life Extension Programs • Replace Non-supportable Infrastructure • NextGen Planning • Pay, Compensation and Benefits (Retain and Sustain Resources) • System Engineering and Integration Planning • Requirements Development • Demonstration Verification and Validation • Technology Innovation • Research • Pay, Compensation and Benefits (Retain and Sustain Resources) • Safety and Regulatory Support Funding Pull

13. FAA ATO & NextGen Funding and Financing Alternative Funding • Internationally Market ATO Data and Services • Section 207 FAA Modernization and Reform Act of 2012: Assistance to Foreign Aviation Authorities • Potential Recurrent Annual Revenue Value: $100 - $500 million • Surplus and Sell Excess FAA Assets • Section 210 FAA Modernization and Reform Act of 2012: Improved Management of Property Inventory • Potential Annual Revenue Value Over the Next 5 Years: $350 million • Potential Recurrent Annual Revenue Value: $110 million • Implement Public-Private Partnerships • Section 221 FAA Modernization and Reform Act of 2012: Public-Private Partnerships • Potential Annual Revenue Value Over the Next 5 Years: $350 million • Borrowing • Requires Legislative Action • Potential Annual Revenues for NextGen Investments Over the Next 5 Years: $5 Billion • Legislative Revision to FAA Authorization • Expend Any Growing AATF Uncommitted Funds: $1 Billion Annually over the Next 5 Years

14. FAA ATO & NextGen Funding and Financing Internationally Market ATO Data and Services • Partner with Iridium to gain access to and resell global ADS-B surveillance data to ANSPs around the world • Team with US companies to build second and third world ATC systems using satellite based communications and surveillance leveraging aircraft equipped with satellite navigation

15. FAA ATO & NextGen Funding and Financing Surplus and Sell Excess FAA Assets • FAA Real Estate Management System (REMS) list 63,800 pieces of land, building or structures valued at $9.1 Billion • 9,500 of these facilities are estimated to have a viable commercial use and value estimated at $1.4 Billion • Liquidation of these facilities would save $98 million is planned refurbishment costs • Liquidation of these facilities would save $99 million annually in reduced maintenance costs • FAA Facility Service and Equipment Profile (FSEP) lists 75,200 ATC equipment assets with an estimated value of $12 Billion • Of the 75,200 assets, 12,700 would be recoverable from consolidation of facilities or functions • Decommissioning of assets no longer needed under NextGen would yield an estimated $294 Million • Equipment decommissioning enabled through consolidation would save $10 million in annual maintenance costs

16. FAA ATO & NextGen Funding and Financing • Implement Public-Private Partnerships • As a corollary to P3 aircraft equipage, develop public-private partnerships to support FAA NextGen capital investments similar to the models used by the US DOT for toll roads development and operation • Private companies would provide capital for NextGen system development, deployment, sustainment and operations in exchange for long term contracts (e.g., 20 year lease to own) in exchange for competitive rates of return on capital investments • Borrowing • Congress needs provide authority for flexible long-term borrowing from US Treasury or from private capital markets “Borrowing is not an option but a necessity for capital intensive enterprises, especially in technology transitions.” 1997 National Civil Aviation Review Commission

17. FAA ATO & NextGen Funding and Financing • Conclusions • Alternative Means of Funding and Financing could provide FAA with an annual effective supplement to its budget of up to $1.2 billion annually through 2015 • Of the $1.2 Billion, $850 M is represented by new revenues and $350 M is represented by reduced capital outlays • If AATF Uncommitted Funds Grow Congress could Authorize an Additional $1 Billion per Year for Operations and NextGen through 2015 in Lieu of Reducing General Fund Contributions • FAA Leadership Must Decide What Course of Action it Will Recommend and Take

18. 2012 FAA Budget Briefing to Industry May 7, 2012

19. Thanks to Our Sponsors 2012 FAA Budget Briefing to Industry