Some of these changes may be desirable, but I believe the agency should be compelled to justify each one. I assume that they are here this morning to do that.

Hopefully, Mr. Chairman, these hearings will enable us to decide which portion of H.R. 7488 will improve the overall quality and enforcement of the FAA Act.

I look forward to hearing the witnesses this morning.
Thank you, Mr. Chairman.

Mr. ANDERSON. Mr. Fary.

Mr. FARY. Thank you, Mr. Chairman. I wish to welcome the distinguished panel, especially Mr. Langhorne Bond, who hails from Illinois, and whom I have known for many years, back in our State legislative days down in Springfield. He was always a capable and knowledgeable person. Nice to have you here. Nice to see you again, Mr. Bond.

Mr. BOND. Thank you, sir.

Mr. ANDERSON. Thank you. Mr. Fary.

Mr. Hammerschmidt?

Mr. HAMMERSCHMIDT. Mr. Chairman, I don't have a statement. I just want to welcome our witnesses.

I am looking forward to hearing their testimony. Thank you. Mr. ANDERSON. Our first witness today is Hon. Langhorne Bond, Administrator of the FAA. He is accompanied by Clark Onstad, chief counsel, and Jonathan Howe, deputy chief counsel.

Mr. Bond, we do have your prepared statement. You may read it or extemporize from it.

[Mr. Bond's prepared statement follows:]

STATEMENT OF THE HONORABLE LANGHORNE M. BOND, FEDERAL AVIATION ADMINISTRATOR, BEFORE THE HOUSE PUBLIC WORKS AND TRANSPORTATION COMMITTEE, SUBCOMMITTEE ON AVIATION, CONCERNING PROPOSED CIVIL PENALTY LEGISLATION. JULY 1, 1980.

Mr. Chairman and Members of the Subcommittee:

I welcome the opportunity to appear before the Subcommittee today to testify in behalf of the Administration's legislative proposal to amend the Federal Aviation Act of 1958 to increase the FAA's civil penalty authority. That legislation, pending

before the Subcommittee, has been introduced as H.R. 7488.

Enactment of this legislation would be a major step by the Congress toward the promotion of aviation safety. We are particularly pleased that the Subcommittee, despite its busy schedule, is holding these hearings at this time.

I would like to briefly summarize the major features of our proposal and then expand on our rationale for the legislation. The legislation has three major features. First, it would raise the pmissible civil penalty for a violation of the Federal Aviation Act or regulations issued thereunder from the present level of $1,000 to a maximum of $25,000. Second, it proposes the establishment of a simplified administrative

mechanism under which civil penalty cases would be heard before

a National Transportation Safety Board administrative law judge rather than tried in U.S. district court. The third major

feature of our proposal is the establishment of criminal penalties for violations of title VI of the Federal Aviation

Act.

NEED FOR INCREASED CIVIL PENALTY AUTHORITY

We believe the increased civil penalty authority is the most important element of our legislative proposal. The current $1,000 level was enacted by the Congress in 1938 as part of the Civil Aeronautics Act of 1938. During the more than 40 years which have passed since that time, the deterrent effect of that $1,000 penalty has continued to erode. What once was a stiff penalty is now little more than a nuisance to many operators who can assume such a penalty as a cost of doing business. It's important that the Congress act to reestablish an economic disincentive of sufficient magnitude that it will assist us in achieving greater regulatory compliance by the aviation community. I asked my economists to tell me what a $1,000 fine in 1938 amounts to today. They tell me it's about $190.

What does the current $1,000 fine mean today? Let's consider a typical wide-body flight from Washington to Los Angeles.

The

basic seating configuration of a 747 allows for 385 passenger seats. With current one-way fares of $285, and an average load factor of 60%, gross receipts for one trip would be $65,835. Contrast that $65,835 with a possible fine of $1,000. Add to that the possibility that a regulatory violation may not be discovered by the FAA. It is hardly surprising then that we have found cases in which aircraft, carrying many passengers, have been dispatched with known defects.

In recent civil penalty cases that have attained substantial publicity because of the large civil penalties sought by the FAA, we found patterns of violations in which aircraft had repeatedly been dispatched without regard to defects. Because of the repeated dispatch of these aircraft, the penalties accumulated to high levels. The amount of these penalties has now been raised as a basis not to pursue legislative action to raise civil penalty authority. The argument is that these penalties show that existing remedies are clearly adequate. This argument is fallacious. The high civil penalties we proposed in those cases were for repeated regulatory violations.

Apparently the amount of a civil penalty which the FAA could assess per violation was > low to deter the repetition of known violations. If the present penalties are adequate, how could these operators have permitted so many violations to occur? Even if you assume arguendo that top

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management did not know about the repeated violations, the question that naturally comes to mind is whether the potential $1,000 civil penalty is so low that it does not inspire

management to put in place the systems that would alert management to these repeated safety violations.

Industry attempts to focus on the recent large penalties amount, in my estimation, to a smokescreen. They obscure the fact that the likelihood of such multiple regulatory violations occuring in the future would be much diminished with an adequate economic deterrent. Potential civil penalties in the $25,000 range combined with random enforcement are the most effective way to achieve a high degree of compliance.

Focusing on the large civil penalties which accumulated because of repetitive violations also diverts attention away from the need to deter individual regulatory violations which can pose serious safety threats. In fact, most operators, as a matter of course, adhere to the regulations. However, there may be times when they are tempted because of various pressures to let things slide one time, considering the low level fine for only one violation and assuming that one violation would be tough to find. In that same kind of situation, however, with the knowledge that such an action could result in a substantial penalty, compliance with the regulations would be more likely.