Industry worries about impact of budget cuts on FAA towers

WASHINGTON Thu Sep 5, 2013 7:31pm EDT

United Continental Airlines CFO John Rainey speaks during the Reuters Aerospace and Defense Summit in Washington September 5, 2013. REUTERS/Gary Cameron

United Continental Airlines CFO John Rainey speaks during the Reuters Aerospace and Defense Summit in Washington September 5, 2013.

Credit: Reuters/Gary Cameron

WASHINGTON (Reuters) - Industry executives urged Congress to help the U.S. Federal Aviation Administration avoid the disruptive air traffic tower closures that created chaos earlier this year as the next round of sequester cuts looms in October.

Unless Congress comes up with a budget for the next fiscal year, which begins October 1, air traffic controllers could find themselves facing the same furloughs that caused flight delays in March, when the cuts initially went into effect.

Congress moved quickly in April to pass legislation that allowed the Department of Transportation to use about $250 million in unspent funds from the Airport Improvement Program to cover immediate salaries of air traffic controllers and other essential employees at the FAA.

"I'm glad it was rectified quickly last year but that created a big headache for a lot of our customers, and is not something that we want to repeat again," said United Continental (UAL.N) Chief Financial Officer John Rainey at the Reuters Aerospace and Defense Summit.

The FAA estimated that hundreds of flight delays were directly caused by the furloughs, inciting traveler backlash at major hubs including Chicago, New York, Los Angeles and Atlanta.

FAA spokeswoman Laura Brown said the potential impact of the budget cuts in fiscal year 2014 remained unclear.

"Congress has not yet approved a budget for FY 2014 so we do not have an update on future funding allocations," Brown said in a statement emailed to Reuters. "The administration continues to urge Congress to act to replace the damaging cuts imposed by the sequester with a balanced approach that reduces the deficit while protecting critical priorities."

"Everything is really up in the air right now," said one U.S. official, who was not authorized to speak publicly.

The FAA has already halted training programs, cut back on maintenance and stopped hiring new personnel, said the official, adding that it was unclear where the agency could find additional savings to avoid a bigger impact on modernization and air traffic controllers.

Marion Blakey, chief executive for the lobbyist firm Aerospace Industries Association, said sparing the highly visible air traffic controllers from cuts could come at the expense of infrastructure investment.

"The chances are excellent that the investment accounts will be hit the hardest," said Blakey at the Summit.

Scott Thompson, who heads the aerospace and defense practice for PricewaterhouseCoopers PWC.UL, said he hoped funding for infrastructure improvements, such as the Next Generation Air Transportation System - a project to modernize the nation's air traffic system - would be preserved alongside flexibility for keeping towers open.

"Whatever they do I think Congress will give the FAA the wherewithal to man the towers the way they need to be manned," said Thompson.

The sequestration cuts were originally devised by Washington in 2011 as a way to force the White House and Congress to find other ways to reduce the federal deficit by $1.2 trillion over the next decade. The mandatory cuts kicked in on March 1, when lawmakers failed to reach agreement on any alternatives.

A first round of $85 billion in across-the-board spending cuts was implemented in March, with another $109.3 billion to be shaved from the government budget starting October 1.

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(Reporting by Paige Gance; Editing by Carol Bishopric)

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