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Economic Impacts of FAA Budget Sequestration on the U.S. Economy


The Aerospace Industries Association, under the banner of Second to None (secondtonone.org), called a convocation of all segments of civil aviation to hear more about Sequestration. The point of the meeting, called by AIA’s CEO and President, Marion Blakey, was a very comprehensive report on the devastating impact of this budgetary construct on the FAA and cascading from there onto commercial flights, general aviation, manufacturers and beyond.

The study, authored by Dr. Stephen Mullin of Econsult, defines the cataclysmic consequences if January 2, 2013 [the 141 days/minutes/hours/seconds shown in the above Doomsday Clock] arrives without legislative actions forestalling Sequestration. As highlighted therein, the parade of horribles is exemplified by the following numbers:

  • $1B Sequestration Impacting Current Air Service Leads to:
  • NextGen implementation could be delayed until 2035;
  • 66,000 to 132,000 annual jobs lost nationally
  • $10 to $20 billion in annual reductions in economic activity
  • Up to $1 billion in reduced Federal and State annual tax revenues.”
  • Annual economic losses beginning in 2021 of $40 billion, growing to $80 billion by 2035
  • Annual job losses beginning in 2021 of 700,000, growing to 1.3 million by 2035

The forecast is VERY conservative and is based on no specific micro assessment of which specific line items the FAA would reduce in response to the mandate. The percentage reduction was supposed to be 6%, but as the dialogue between Dr. Mullin and AAAE’s Senior Executive Vice President, Todd Hauptli, made it clear that the cut of approximately 6% grows to 15% because the Trust Fund excludes it from Sequestration thus increasing the impact on the other accounts.

As horrific as the numbers were, the most impressive aspect of this convocation was the breadth and depth of the aviation industry’s support for the Stop the Sequestration Now message. The 1st speaker was Secretary Mineta, whose career includes critical perspectives of the Secretary of Transportation and the Chair of the Public Works Committee (plus having led the Aviation Subcommittee); his history in both the legislative and executive branches was that of bipartisanship. His speech included a number of insightful comments, but his MESSAGE was to read the Econsult Report.

The breadth of the “coalition” includes statements of AAAE, ACI, ATCA, AOPA, ALPA and RTCA. Representatives from all of the other trade associations were present and it was mentioned that NATCA and the IAM have lined up in support of the problem.

To exacerbate the problem, as comments from the audience emphasized, FY13 starts in 6 weeks. The Sequestration reduction percentage is an annual number. Prudent financial management should try to start limitations on spending NOW; because waiting for 3 months means that a quarter of the fiscal year is lost and the percentage cuts will have to be imposed over the remaining 3Qs, thus increasing the effective rates substantially over the current inflated 15%. Another cogent remark noted that the FAA staff, which has been subjected to 23 stopgap extensions of its authorization and one 14 day furlough, is susceptible to depression and that negative outlook will be experienced now, not later.

While all agreed that an omniscient Administrator would divine how to cut budgets without hurting safety, across the board reductions of greater than 15% will knife through whatever fat there may be, will sever muscles and may even crack the bones of Safety. Implementation of NextGen will be delayed 10 years or more and immediate “discretionary”, but incredibly safety beneficial programs like CAST will likely feel the axe of Sequestration on day 1.

Read the report, write to your federal elected representatives about this abdication of budgetary responsibility called Sequestration, contact your Presidential candidate of choice to tell him that he must take a stand on this vital issue and share your concerns with your business cohorts, your friends and your family. THERE ARE ONLY 141 DAYS UNTIL SEQUESTRATION GOES FROM THREAT TO A HORRENDOUS REALITY!!!

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