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high-risk locations will send loud and convincing signals around the world, that the U.S. Government is actively involved in protecting U.S. flag-carrier operations from acts of terrorism, and that these carriers are no longer exposed, on their own, as attractive and vulnerable targets. We agree also with the limitation in your bill that would not automatically require the installation and use of this equipment at U.S. airports, but, rather, authorizes the administrator to undertake such requirements as the threat warrants. We think that fortunately, the same threat does not exist domestically, as it does in Europe and the Middle East, and the need for that equipment at U.S. airports does not exist at the present time. With regard to the overall need for Federal assistance, I feel that that is absolutely essential. If the Federal Government found it necessary to protect, by military convoy, the operations of maritime interests in transporting oil in the Persian Gulf, then it seems to us to be just as appropriate and necessary for the Federal Government to provide protection for the transportation of U.S. citizens, by U.S. air carriers, from the same areas of the world, who are subject to the same threat. On the subject of airport access doors, we agree with the objectives of the FAA rule; however, we think that the implementation of that rule ought to be on a more studied and deliberate basis. The ATA joined with other elements of the aviation industry in this country, and as recently as last March petitioned Secretary Skinner to take another look at that regulatory requirement, and take advantage of the recommendations of the industry as a whole to approach that problem on a pilot project basis, to allow the airport operators and others who would be affected by the requirement to gain experience. Then full implementation of the rule could proceed in a more efficient and more effective way to accomplish the results, and we would probably have a better product in the long-run, than going at it as now proposed. In addition, we believe that the funding that would be saved by a more deliberate implementation of that rule would be better directed toward the higher threat that exists in the form of terrorism at high-risk airports overseas. In this period of austerity and scarce resources, our investments would pay better dividends if approved on that priority basis. Mr. Chairman, that I think concludes the observations I wanted to make. My full statement is submitted for the record. Mr. OBERSTAR. Your complete statement will be included in the record in full. Thank you very much, Mr. Lally. I, again, greatly appreciate your thoughts on various aspects of the pending bill, and overall. I have a few security questions facing the air-traveling public, and airlines and airports. Your statement points out that there are different security rules for foreign carriers than U.S. carriers. Could you be more specific about those differences, and whether there are some competitive * for them, and disadvantages for our carriers as a result. Mr. LALLY. Well, the differences are immense, really. The extraordinary security measures that are practiced by U.S. air carriers range from the inspection of each and every piece of checked baggage, to the guarding of aircraft, to the supplemental or redundant screening of passengers and to the inspection of people who service aircraft. Basically, none of those procedures are implemented by all foreign carriers on a routine basis, as they are by U.S. carriers. So that there is, I think, a significant disparity in the level of security. That also results in disparate levels of expenses incurred by the two classes of carriers. There is no “free lunch;” the extraordinary security measures are costly. They are in fact very costly. So that the fact that a foreign air carrier does not have to implement the same measures, results in a reduction in the costs of that carrier's operations. However, while there are competitive aspects to this, to me, the difference really is in the disparate level of security that is provided the passengers, the flying public who travel on both U.S. and foreign carriers. They are getting extraordinary security protection by U.S. carriers, and the same extraordinary security requirements do not exist, or do not apply to the operations of foreign air carrierS. So there are different levels of security, that result also in different costs. Mr. OBERSTAR. So, in summary, you concur that there are some cost advantages, at least, for foreign air carriers in competition with the United States? Mr. LALLY. Yes, sir. There are. As you mentioned earlier, the U.S. air carriers are private-sector organizations in business to make a profit, and unless they make a profit they do not stay in business. And there are only two ways to make a profit: one is to generate more revenue and the other is to reduce costs. So that that basic fundamental fact exists. The U.S. air carriers are incurring higher cost. The passengers on U.S. air carriers, however, are receiving greater benefits in the form of increased security. Mr. OBERSTAR. Of course that is very important. The bottom line is security and arriving safely at your destination. But how is security provided for Alitalia, for example? Do they have a surcharge? Does the government put protection—— Mr. LALLY. To my knowledge, Alitalia does not have a surcharge, and I do not know the extent to which they are subsidized by the Italian government. The U.S. carriers—I think not all of them— but several U.S. air carriers adopted a $5 transatlantic security surcharge following the introduction of the extraordinary security measures in the summer of 1985. The surcharge was for costs incurred for those extraordinary security measures. The introduction of new security requirements following Pan Am 103, raised the costs, again, of security, but the carriers have not raised the surcharge. Mr. OBERSTAR. You would have to raise the surcharge to accommodate the new regulations, if put into effect on thermal neutron analysis devices and other devices, wouldn't you? Mr. LALLY. Well, that would be a carrier option. Not every carrier adopted the $5 surcharge, and there would not be a requirement that every air carrier adopt a security surcharge, or that the security surcharge adopted by carriers be identical. There would be the option of the carriers to do that. Mr. OBERSTAR. Secretary Knisely suggested a $1.25 additional surcharge cost to accommodate the cost of TNA. Have you given that some thought and analysis? Mr. LALLY. Not really. We believe, very strongly, that TNA's ought to be federally funded and I have not done the arithmetic. I recognize what he did was use the number of international emplanements and the $100 million figure proposed in your bill, to arrive at his figure. It may or may not be an accurate figure. I do not know. Mr. OBERSTAR. Does that $5 item cover all of your costs of providing security? That x-ray machines, the metal detectors, the personnel? Mr. LALLY. No, sir. The $5 is only levied by four airlines, I think, for transatlantic operations. It does not cover at all, nor does any security surcharge cover the domestic costs. It has been estimated—although it is just an estimate—that the U.S. carriers' expense, annually, for security, is in the area of $500 million for total security costs. And there is no surcharge identified or dedicated for that expense. Mr. OBERSTAR. Would you give me that number again. $500 million for security, by all airlines? Is that what you are saying? Mr. LALLY. Yes, sir. That is the estimate we have given. As best I can break that down, is that the estimate for passenger screening alone, in the United States, is $250 million. Now, if we add the costs of the extraordinary security measures that are in place, together with the other expenses associated with security, other than passenger screening, I think a doubling to the $500 million level is a fairly accurate estimate, but truly an estimate. Mr. OBERSTAR. With those numbers in mind, it is not as though the airlines are not paying a fair share of the costs of security, in a broad sense. Mr. LALLY. No. The airlines are paying every cent of the cost for security. There is no other cost-recovery mechanism. And security is expensive. Mr. OBERSTAR. And that security cost is factored into the ticket, the fare, in some way, isn't it? Mr. LALLY. Security costs are considered just like any other operational cost—maintenance, fuel, wages—and those costs are defrayed through the revenues obtained from ticket sales. Mr. OBERSTAR. But now to go to a higher level of technology to meet a new and unmeasurable threat—and that is random terrorism, random destruction of aircraft—requires higher costs, and a different yardstick for measuring security. You have said that in your testimony. That has been my sense from the earlier hearings, and my analysis of the dimension of the threat to the United States. It really is the United States that is the target. Our policy, our presence as a Government overseas. It is not as though the terrorists are going after a particular U.S. carrier, and, as Secretary Knisely suggested, tomorrow, it may be a foreign carrier or another government.

And just as you pointed out so well, we reflagged foreign vessels to move Persian Gulf oil, but planted the U.S. flag on the deck of ships built in foreign shipyards, with foreign crews, put a U.S. captain on board. Only 6 percent of that oil came to the United States and yet the taxpayers bore the cost. Now maybe we should get the Defense Department to pick up the cost of TNA, or the State Department. Maybe it ought to come out of another budget, but I do think it is a public responsibility. Should we include the vapor detection devices in our legislation, as a requirement, at least on an interim basis? or. LALLY. Yes, sir. We feel you should. I should have mentioned that. Mr. OBERSTAR. You did in your written testimony. Mr. LALLY. Yes. We think that TNA has passed the FAA muster, but that there are other techniques that are showing very great promise. Specifically there are recent reports of successful FAA testing of vapor detectors at the technical center in New Jersey. So we believe that the legislation ought to permit the administrator to approve the use of such equipment on an interim basis. Even though it may fall a little bit short of the goals, or standards met by TNA, it would still serve as a better tool to detect explosives than the alternative measures, of x-ray and physical inspection. Mr. OBERSTAR. Thank you, Mr. Lally. I may have another question or two, and I want to yield at this time to the gentleman from Pennsylvania. Mr. Clinger. Mr. CLINGER. Thank you, Mr. Chairman. In your view, the vapor detection devices are at a point now where they could be installed immediately? Mr. LALLY. Well, there is one vapor detector that I think is on the shelf and could be used right now. There is another one that is a bit more exotic, I think, that is going into production, and would be available in the relatively short term. That is the one that was recently tested by the FAA. Mr. CLINGER. And you would see these as an interim solution to ultimately be phased out and replaced by the TNA? Mr. LALLY. Well, no, I think there would be room for them to continue to supplement TNA. They have characteristics and application that TNA does not. TNA, while not completely stationary, is

less portable than the vapor detectors. The vapor detectors could go

on an airplane, or could examine a public locker, or could be
moved to examine a suspect bag, while the TNA would have to
function in a more stationary mode.
So I look at them, really, as not so much competing technologies
but complementary technologies.
Mr. CLINGER. They are both designed to do basically the same
job, aren't they?
Mr. LALLY. Yes. They are both designed to detect explosives.
Mr. CLINGER. But you are saying that perhaps we need both?
Mr. LALLY. I am not technically competent on that. I think that
the one vapor detector has been reported by FAA as having the
ability to detect small quantities of plastic explosive in checked
baggage, and that is the objective of these measures.
The extent to which the other one has that detection capability I
do not know, but the other one I believe is the one that FAA stated

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earlier that they intend to put through the same test at the technical center next month. Mr. CLINGER. You indicated that the entire cost of security, domestically, is being borne by the industry, but it is true, is it not, that the Federal Government has invested significant resources in research and development on these very devices that we are discussing? Mr. LALLY. That is true, there is no doubt about that. The FAA has done a remarkable job in security R&D, accomplishing what they did while other governments that have been at the same task just as long, have not produced the same results. Mr. CLINGER. With regard to your proposal that foreign air carriers be required to undertake the same security measures that we are imposing upon U.S. flag carriers which, ideally, we would all like to see a uniformity in terms of what all airlines are required to undertake for security purposes, but it seems to me there may be some problems with that. We would be imposing, basically, a unilateral set of U.S. standards on foreign air carriers operating on foreign soil. Isn't that going a little fast? Wouldn't we be better off to engage in negotiations with the foreign state before we try to impose U.S. standards? Mr. LALLY. Well, I would like to answer that sort of “yes and no.” Yes, we should always, I think, negotiate, and yes, I think ICAO is an avenue to pursue negotiations, but those are long-range endeavors—you know—really very noble objectives but hard to accomplish and requiring a lot of time. The FAA faced up to the question of authority to impose security requirements on foreign air carriers overseas in 1975, I think it was. The regulation that was on the books, until just revised, required foreign air carriers operating flights to and from the United States to have security programs that included the screening of passengers and baggage, et cetera, and to provide FAA information about those programs upon request. And FAA, over the years—it is my recollection—have inspected the compliance of foreign air carriers with those regulatory requirements, and have, on occasion, actually taken enforcement action for carrier failure to comply. So, the question of authority to extend these requirements to foreign air carriers has been faced, and answered in 1975. The only difference now is the degree to which that authority is exercised. We are saying that that authority should be exercised to the extent necessary, to impose the same security requirements on foreign air carriers serving the United States from the same 45 high-threat airports in Europe and the Middle East. I do not think there is any question of authority. Mr. CLINGER. So basically you are saying that we would not be establishing any precedent here? Mr. LALLY. No, we would not. Mr. CLINGER. That the precedent was established in 1975. This would be somewhat of an enlargement, I guess, of what we would be expecting the foreign carriers to be engaged in, but that it should not come as a surprise to them that we would be requesting them to do that?

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