STATEMENT
of the Honorable Nydia M. Velázquez, Chairwoman
United States House of Representatives, Committee on Small Business
Full Committee Hearing: “Grounded: How the Air Transportation Crisis is Affecting Entrepreneurs and the Travel Industry”
Thursday, June 26, 2008

Commercial air travel has been a mainstay of the economy since the 1940’s. As the industry has evolved, businesses in both small towns and big cities have gained access to markets previously thought unreachable. Today, air flight continues as a linchpin of our country’s trade and business travel. It not only drives the nation’s $740 billion tourism industry, but it also sustains the economy. Virtually every sector depends on its speed, reach and relative convenience.  Without airplanes, commerce as we know it would, very simply, cease to exist.

But now, in the face of grave industry challenges, air travel has come to be as much of a hindrance as it is a help. Today, we are facing what can only be described as an air travel crisis.

Last year, flight delays alone accounted for 20 percent of total air travel time and, according to the Travel Industry Association, proved to be far more than just an inconvenience to travelers. In fact, TIA estimates that delays dealt a $41 billion blow to the already struggling U.S. economy. In 2007 alone, delays accounted for $12 million in lost productivity.  It seems airport waiting areas have become virtual black holes for business travelers.

And it gets worse.

These delays, when paired with soaring fair rates and exorbitant new passenger fees, are costing the economy an additional $26.5 billion. With prices skyrocketing and convenience plummeting, millions of Americans are turning away from the airlines altogether. Just last year, travelers opted out of 41 million domestic flights. These avoided trips are costing the U.S economy billions of dollars, the brunt of which is being borne by our entrepreneurs. 

Small firms make up 97 percent of the travel and tourism industries, which drive a multi-billion dollar sector of the national economy and have been hard hit by declining air travel. Perhaps not surprisingly, close to one third of the economy’s $26.5 billion setback has been shouldered by the entrepreneur-driven hospitality sector.

The fallout of America’s air travel crisis has reached beyond the travel and tourism sectors to threaten a myriad of other related businesses. In 2007, industries that rely on air travel suffered losses close to $10 billion. For these small business-dominated sectors of the economy, the future effects will be twofold.

On the one hand, tourists may decide to forgo certain trips altogether. The other possibility is that travelers will simply scale back their travel expenditures, taking a chunk out of the entrepreneur-driven hospitality industry. Already, we are seeing hotels slash room rates in an attempt to attract these increasingly cost-conscious travelers.

But consumers are not the only party suffering from our broken air travel system-- A lack of runway capacity and regulation has forced many small airlines into bankruptcy. And as these businesses fail, passengers are faced with fewer and more expensive choices. 
This means that small firms in certain regions will have less access to diverse markets and clients. Entrepreneurs currently make up 97 percent of exporting businesses. In our increasingly global economy, the last thing we need to do is create new roadblocks for them. 

There is no one single solution to these problems, and anyone who suggests otherwise is over simplifying a very complex set of issues.

Before attempting to tackle these challenges, there are a series of concerns we must first address. Not least of all is a severely deteriorated and inefficient infrastructure. As a result of this, airports are unable to accommodate today’s volume of planes and passengers. If we are to ease the congestion and curb delays, then we must first focus on improving and expanding airport infrastructure, both on the ground and in the sky.

America’s air travel system is broken. Massive delays and rising ticket prices have pushed the problem beyond the point of inconvenience—it is now a serious threat to both small businesses and our national economy. In today’s hearing, we will discuss the current air travel system’s effect on small businesses, and explore potential solutions for what has truly become a crisis in our skies.

I want to thank all the witnesses in advance for their testimony. The Committee is pleased they could join us this morning, and looks forward to their insights on the issue.