Thank you, Joe, for your kind introduction.

It is a privilege to follow Secretary Peters and Administrator Marion Blakey. They have a difficult job to do, and they deserve our thanks, and they deserve our support.

They and their predecessors have helped build an aviation network that links our communities and our cities… connecting them to the rest of the world safely and reliably.  That network fuels our economy, driving more than a trillion dollars in economic activity and generating more than 11 million U.S. jobs.

This country has long enjoyed the economic benefits of a leading, world class aviation system.

However, new technology is driving significant advances in aviation -- from aircraft design to Air Traffic Control systems -- and the U.S. no longer leads in infrastructure, nor in fleet modernization.

A robust and competitive U.S. aviation industry should be a national priority.  We should look at the rapidly evolving global aviation sector beyond the borders of the United States, to fully understand the scope and scale of change that will be required for the future.

To regain industry leadership and to succeed in today’s global marketplace, we must have a modern aviation infrastructure -- both physical and regulatory -- that will enable the U.S. to compete with the best the rest of the world has to offer.

n      Our infrastructure, air traffic control systems and many of our major airports are in desperate need of modernization to keep up with growing demand and technological advances.

n      Our regulatory environment resists change even 30 years after deregulation, and uniquely impedes our industry’s ability to invest and grow.

n      Our network carriers, after major restructuring both in and out of court, still have much to do to be sustainable. 

These issues have evolved over time, and there is no quick fix or simple solution.

Regardless, we need to be decisive on each of these challenges. Marginal adjustments will not suffice to move the U.S. to a leadership position in the near term, nor in ten years from now when the demand for travel increases by another 30 percent or more.

The Conference focused this morning on how to modernize our aging ATC infrastructure, and that is a very good place to start.

Physical Infrastructure

The ATC system dates back to the 1950s.  It has served us well but cannot meet today’s operational needs, nor satisfy the requirements of growing demand, such as the FAA’s projection of one billion passengers per year in 2015.

Antiquated ATC technology and operating procedures generate additional cost borne by the airlines, such as inefficient aircraft routings that cause unnecessary fuel expenditures. In 2005, it has been estimated that ATC related delays cost the U.S. economy some $15 billion.

Our customers directly bear the cost -- counted in lost family time, missed appointments, foregone business opportunities. The FAA projects that one of every four flights will be delayed in ten years as annual flight operations grow by more than a third.

And our environment bears the cost. Experts estimate that modernization of U.S. airspace management alone could result in 12 to 15 percent improvement in environmental performance with a reduction in fuel consumption and related emissions.

All stakeholders, industry and government alike, should recognize the need for swift and decisive action to modernize ATC.  Modernizing how we finance that effort should be equally straightforward.

We need a funding structure that is stable, predictable, and sufficient to transform our outdated system into one that is satellite-based and then maintain it. The funding mechanism must be fair, make business sense, and rest on sound, logical principles.

The original 1970 Airport and Airway Revenue Act was based upon two fundamental and equally logical principles: user-pays and cost-based financing. Since that time, corporate non-commercial aviation has increased dramatically. But, today, they do not pay their fair share of the costs. 

• Why should the average airline passenger subsidize the cost of ATC control of a corporate executive jet, particularly where passenger and corporate aircraft demand comparable attention and government resources? 

• Why should airlines – and ultimately their passengers – be asked to pay 94% of Trust Fund revenues when they only use 68% of ATC system services?

I believe it is time to respect Congress’ original intent and to implement a fair funding system where users pay for the ATC services they actually use.  The proposed FAA Reauthorization Bill takes a step in the right direction.

Our airports must also expand to accommodate increased demand. 

Like ATC, many U.S. airports were state of the art when built, long before anyone had contemplated an aircraft the size of an A380. Years of inertia have stalled the airport expansion necessary to meet growing market demand and operational requirements of airlines.

Other countries are addressing the need for infrastructure reform to bolster their competitive position. The UK, Germany, France and Australia are deploying next generation ATC that increases safety and efficiency while providing for future growth. 

Most major jurisdictions -- such as the UK, France, Germany, Switzerland; Australia, and New Zealand; and Canada -- have in place cost-based funding structures to ensure adequate, stable revenue to fund modernization efforts, including the construction of additional airport capacity.

Many of our newest global competitors -- China, India and the Middle East -- do not face the same challenge of obsolescence as they pursue “Greenfield” developments, with impressive state-of-the-art infrastructure… in many cases with U.S. help and technology. 

China and India are implementing precise area navigation capabilities at major airports. 

As of last November, China was building 42 new airports. Dubai, home to an airline with $30 billion of orders for long-range aircraft, just announced a $4 billion airport expansion. The goal: to create a global air hub with no fewer than six parallel runways, each capable of handling the largest intercontinental jets.

All of that said, I do not underestimate the complexities involved in infrastructure reform in the United States. 

However, we cannot delay or limit reform on the grounds that we are a “mature” market.  While emerging markets have the benefit of starting from scratch, other mature jurisdictions have taken up the challenge.  We must do the same to remain competitive.

Regulatory Infrastructure

Sustaining U.S. aviation competitiveness is not just about modernizing our runways and ATC. It also demands transformation of our outdated “regulatory infrastructure.”

Economic regulation hampers the ability of the industry to develop as any other international business. 

Concluding the job of deregulation would allow the industry to engage in efficiency-driven alliances, and cross-border mergers that are common-place in other global industries. 

There are examples of airline consolidation outside of the U.S., in this instance I refer to Air France/KLM, the world’s largest by revenue, and Cathay Pacific/Dragonair in Asia.  While many governments encourage consolidation as a means to enhance global scope and scale of their carriers, the U.S. regulatory climate impedes it and continues to focus on industry fragmentation.

In terms of opening markets, the proposed U.S.-EU agreement may not be perfect. It is, however, an important step toward international liberalization that would allow airlines on both sides of the Atlantic operational freedoms that decades-old regulation has restricted or denied altogether.

And, there is a commitment to negotiations that will seek further liberalization and regulatory cooperation in important areas including foreign investment, state aid, environment, security and infrastructure.

In fact, the pending US-EU agreement -- to be voted on in Brussels next week -- is a testament to the tenacity of U.S. negotiators at DOT and the State Department. If approved, the agreement will provide the forward momentum needed for further liberalization and serve as a template for reform in other regions of the world.

Asia is a critical growth region for commerce, tourism and, therefore, aviation. Today’s U.S.-China aviation agreement effectively allows only one additional daily passenger service from the U.S. to China’s major markets each year…

I would hope that many in this room share our excitement that United was selected to be that “one new route for 2007” … and will launch our new service from Washington to Beijing next week, the first nonstop link between the capitals of the world’s most dynamic economies.

At the same time, U.S. visa restrictions and bureaucratic inefficiencies discourage travel to the U.S. by visitors from other countries, including such key growth markets as China and Korea… Progress will be made only through further deregulation and improved efficiencies, and U.S. negotiators are meeting with their Chinese counterparts today to discuss additional market access.

United has long been a strong supporter of international deregulation and open markets… including those markets where United has a competitive advantage we might lose.

For example, we support the US-EU agreement, even though it would open London’s Heathrow airport to more U.S. and European airlines. We do not share the short-term view of some carriers that protecting markets from competition is a sustainable strategy for long-term success.

It is the consumer and, in the long run, the market that should decide and all we ask is a level playing field.

U.S.Industry Competitiveness

That same level playing field should apply to the business environment for the network carriers who compete internationally.

Today, after years of restructuring in and out of court, the U.S. network airline industry is stable, but far from healthy. While most U.S. carriers are returning to some level of profitability, we are not yet earning our cost of capital and we are not in a position to make the level of investment undertaken by our international competitors.

That is a stark change from a decade ago when Boeing launched the 777… and United was the launch customer.  

Today, our Star Alliance partner, All Nipon, or ANA, will launch the new Boeing 787 with an order of some 50 aircraft -- more than the total ordered by all U.S. carriers combined.

U.S. network carriers face competitive pressures on all fronts. Domestically, we have a robust, competitive market with Low Cost Carriers well established across the country.  Internationally, there is fierce competition from well-financed European, Middle Eastern and Asian carriers. 

We have consistently said that a viable U.S. network airline industry requires a regulatory environment that supports, or at a minimum does not hinder, the development and growth of strong, financially sound and sustainable global competitors.

Conclusion:

Today we have a unique opportunity to ensure that U.S. aviation can lead into the future – and that it can continue to drive economic growth. 

For the first time in a decade, FAA funding mechanisms and FAA program reauthorization are before us at the same time.

This represents an extraordinary opportunity to prepare our industry and our nation for the economic challenges of the 21^st century.

By working together to take the steps necessary to modernize our infrastructure – both physical and regulatory – we can help ensure our future competitiveness.

Or we can stand on the sidelines complaining and jockeying for position in a rancorous debate over funding mechanisms. 

I sincerely hope we will all choose the former path – and work together for the benefit of our economy, our communities, and U.S. travelers.  

Thank you.