Good morning. Thanks, Spencer. Tim Rogers, nice job again this year as well. It’s always a pleasure to meet with the group whom I like to think of as the bread and butter of aviation in the United States.

You know, just a few weeks ago I had the privilege of representing America at the Paris Air Show. For those of you who’ve never been, it’s quite a spectacle. When they use the word “ pavilion” to describe those exhibits, well let me just say that they’re not kidding. Row after row and display after display of “ can you top this.” They can. They pull out all the stops.

The highlight of the show for the media came at the unveiling of the Airbus 380. And you know, come to think, just about everything there was big.

But standing there … taking it all in … it gave me a chance to think about what drives aviation back home.

And I’ll tell you … what drives aviation in the US of A is right here in this room right now. It’s easy to get caught up in the debates of O’Hare, LaGuardia and Hartsfield. But we can’t lose sight of the big picture. I’ll talk about that more in a minute. I can’t overemphasize that your airports are just as much a part of the “big picture” as the groups and airports that dominate the headlines.

My presence here this morning shows that I believe it … and the FAA is committed to keeping it that way.

So AAAE and the USCTA, thank you for the invitation. The opportunity to be with this group … and honor Willie Card … a man who loved a good steak dinner … well, that’s a place I’ve got to be.

I’d like to talk for a moment about the changing face of aviation. Certainly as you all well know, we are experiencing a return to air traffic volume across the country. We’re exceeding pre September 11 volumes.

But the landscape itself is quite different than what you and I grew up with. Low cost carriers and regionals are the start of it. For those of you who attended the FAA’s aviation forecast conference a few months back, you know that we expect that the size of the regional jet fleet worldwide will double between 0-2 and 0-6. That will bring it to just about 2,000 aircraft. It doesn’t stop there. Worldwide, biz jet deliveries are expected to top 77 hundred by 2011.

This presents an interesting situation for the FAA. As you know, the FAA’s operating costs are paid by the receipts from the Airport and Airway Trust Fund. Those receipts come from ticket taxes. Essentially, our revenue stream hinges on the price of a ticket.

Now, let’s factor in low-cost carriers. America loves a cheap ticket. That’s one of the reasons why the Big 7 don’t look like they used to. There’s a move away from wide-bodies toward smaller, more maneuverable jets.

So what we have is more planes using the system and lower revenue coming into the trust fund. What this means is that we have more to do and less to do it with.

The obvious question: The budget isn’t a blank check … so how do you pick and choose? Do we cut back on certification? Right now, there are several applications in the queue awaiting certification … and each of these new operators will bring additional pilots and crew into the system.

What about inspection? More planes to be handled by inspectors?

Then there’s air traffic control. And modernization. Do we put off the purchase of new equipment … or slow down the programs?

I know you understand full well. The agency needs a stable funding stream that’s not tied to the price of a ticket. The fact is, the cost to provide the services we offer isn’t linked to the cost of those services. That’s something that needs to change. What brings this all to a head is 2007… which is when the excise taxes that fuel the trust fund will expire. If you’ve got ideas, we’re listening.

I’d like to change gears. I know this room has a keen interest in where we stand with AIP. Let’s first take a look at where we’ve been. Last year, we issued 2,150 grants totaling over $ 3.3 billion. Kudos to the folks here who helped get the ball rolling on some of those projects. That’s a lot of planning … a lot of leg work … and it went well.

Now, for where we are. The President has sent his fiscal 06 budget to Congress … with $3 billionfor AIP. While this is a much lower funding level than we’ve seen in recent years, it does reflect the latest trends in airport capital development needs. To put the FY-06 request in perspective, in 2000, the final AIP appropriate level … as adjusted for Appropriation Act Limitations … was $1.851 billion. The FY-06 request of $3.0 billion represents nearly a 62 percent increase over the 2000 amount. Since the passage of AIR-21 in 2000, the appropriated levels of AIP have ranged from a low of $1.851 billion to a high of $3.295 billion. That’s an average of $2.961 billion.

But to be sure, because of current statutory language by funding the AIP at a level below $ 3.2 billion, I think we’ll all see serious consequences. None of us wants it to happen. As you know, under current law, an AIP funding level under $3.2 billion would lead to dramatic changes in entitlement formulas. Passenger entitlements would be halved, and the individual airport’s non-primary entitlement would be eliminated.

With that information in hand, we knew it was very important to preserve the basic structure of AIR-21’s formulas to ensure a stable funding stream from entitlement funds. Accordingly, we’re proposing statutory changes to maintain the entitlement formulas that have been applied since fiscal 2001 when AIP first reached at least $3.2 billion.

I think we’d all agree that it’s important to preserve the special rules. Airports and the FAA have long-range investment plans based on these rules. The disruption to long-range investment plans from a dramatic reduction in apportionment funds could seriously interfere with the development of the national airport system. It could also put quite a strain on the financial resources of many small airports that rely heavily on AIP grants to meet their needs.

As you know, the House action on AIP funding has put the level at $3.6 billion. While this is significantly higher than the $3.0 billion we proposed, we must await action by the Senate.

Come what may, though, we’ve got to look at all of this in a broad perspective. Looking at the funding each year in a vacuum … as if it were a discrete event … that doesn’t give anyone the full picture. You know, I really think that it’s all about balance. We need to balance the needs of the airport community with the other entities in the aviation picture. We need to weigh the bond markets and the NPIAS. Unless you look at the whole picture, you’re looking only at one snapshot … and that’s only a tiny, tiny sliver.

I’ve saved the best for last. As we look at the falderal about the trust fund … what’s happening with delays and efficiency … capacity … one thing is certain. Just about 20 years ago, we made a decision that was custom-tailored for where we find ourselves today. Contract towers are just what the doctor ordered. I don’t think anybody realized just how good a call it was. But we sure do now.

I believe we have demonstrated over the years that it has made sound business sense. Our estimates are – and I truly believe them to be conservative – that contract towers save the aviation industry millions of dollars per year.

There are 229 contract towers operating in the United States. We’ve added three new ones just this year. Welcome to Provo, Rodgers, and Front Range … which I’m told is the tallest GA tower out there.** By the end of the current fiscal year we expect to add Galveston, Texas, and another in Olive Branch, Mississippi … where I can tell you people use just the right accent when they talk.

Contract towers are a success story … but I do need to address the Court challenge. I think everyone here knows that on February 4, the District Court held that the air traffic control services provided under the Federal Contract Tower program are not inherently governmental. That’s good news. Score one for us.

The court noted that Congress had passed legislation as part of our Vision 100 Reauthorization that allowed the agency to contract for ATC services at the old level one towers. The exclamation point came when the court said that these services could be not only with State or Local governments, but also any qualified entity. That’s two.

This addition of allowing contracting with qualified entities clearly showed the intent of Congress that such services were not inherently governmental and could be provided by contract personnel. We agree.

Also in that order, the court invited the parties to file any additional motions needed to address the issues remaining in the case. As you’d expect, both sides filed motions for summary judgment. In addition, after discussions with the agency, AAAE filed a “friend of the court” brief in support of the agency. Thanks, Spencer. AAAE has a unique position representing the airport authorities operating the towers in question. Given that vantage point, AAAE could clearly aid the court in reaching a decision that would give finality to this 10-year litigation. And we’re hopeful that this battle will come to an end soon.

Speaking of litigation, I just got word Friday that we won our case involving the mid-air at Meigs in 1997. The appeals court affirmed the district court’s ruling in our favor. It was the first litigated case involving an accident at a contract tower. Among other things, it called into question the FAA’s authority for the entire contract tower program. The court rejected the argument that the FAA lacked the authority to enter into a contract with private contractors to provide ATC services. That’s terrific news.

Let’s face it. If you take the back of any envelope, people … even the courts … are seeing that contract towers are a good deal. The big picture for America … for aviation … for the taxpayer … is that we need to operate smart … like a business. Contract towers help us do just that. And it’s an investment that we need to keep making. Contract towers were a great idea a couple decades ago … and they’re even better today. The work you do … the services you provide … they’re just as important to aviation in this country as the major hubs. The system needs to be viewed as a whole, and you are a major part of it.

With that, thanks. And if you have any questions, fire away.

**192 feet from the base of the tower cab.