Mr. FARY. Please proceed.

TESTIMONY OF JAMES E. LANDRY, SENIOR VICE PRESIDENT AND GENERAL COUNSEL, AIR TRANSPORT ASSOCIATION OF AMERICA, ACCOMPANIED BY WALTER A. JENSEN, VICE PRESIDENT, OPERATIONS AND ENGINEERING OF ATA

Mr. LANDRY. Thank you, Mr. Chairman.

My name is James E. Landry and I am senior vice president and general counsel of the Air Transport Association of America, which represents virtually all of the federally certificated, scheduled airlines of the United States. I am accompanied by Walter A. Jensen, vice president, operations and engineering of ATA. Our member airlines have a deep interest in the sound and reasonable enforcement of the provisions of the Federal Aviation Act and the regulations issued by the Federal Aviation Administration, the Civil Aeronautics Board and the National Transportation Safety Board pursuant to that act. We therefore appreciate this opportunity to present the airlines' views on the substantial amendments proposed in H.R. 7488.

We recognize that, due to intervening inflation, civil penalty limits established in 1938 may no longer be adequate for dealing effectively with certain offenses. As we will describe, we believe certain adjustments may be justified, if coupled with some containment of existing or new enforcement powers within reasonable and effective limits. However, we believe that H.R. 7488 in its present form is clearly excessive in its reach and should not be reported by this subcommittee.

To put H.R. 7488 in context, one must appreciate that the penalties contemplated would be applicable to FAA, CAB, and NTSB regulations which now consume well over 2,000 pages of singlespaced text in the Code of Federal Regulations. A failure to comply fully with any of the innumerable reporting requirements imposed by the CAB, an agency which Congress is phasing out of existence; a failure to comply fully with the difficult burden of administering the CAB's no smoking rules; an inadvertent violation of one of the FAA's host of recording and reporting requirements; even a violation of one of the NTSB's procedural rules would be covered by the twenty-fivefold increase in maximum civil penalties. And, the knowing and willful violation of any regulation promulgated by the FAA under title VI of the act-including mere procedural and recordkeeping regulations—would be a criminal offense punishable by a fine of $25,000 and 1 year in prison. Surely, such potential civil and criminal penalties are an overkill. Surely, the punishment ought to fit the crime.

The Secretary of Transportation's letter transmitting this bill to Congress indicates that the primary objective of the DOT and the FAA in proposing H.R. 7488 is to improve aviation safety by increasing the penalties for violations of the Federal Aviation Regulations. The airlines share with DOT and FAA the common objective of improving safety, as a matter of the highest priority. Airline managements and their employees have long demonstrated their commitment to improve upon an already excellent safety record. There is widespread agreement among aviation safety experts that the first step in improving safety is to identify safety prob

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lems. They find that this can best be done through the use of information voluntarily provided by the industry people intimately involved in the operation of an airline, such as pilots and mechanics, as opposed to relatively remote Government personnel. Safety experts further agree that overly heavy-handed enforcement by regulators would tend inevitably to reduce the free flow of valuable safety information from those who are regulated.

Experience demonstrates that most of the violations which do occur are inadvertent and unintentional. Increased civil and criminal penalties probably would have minimal effect on improved compliance in those cases. On the other hand, the FAA Administrator has alleged that many operators break the rules as a matter of course, and write off any penalty as an inconvenient but bearable part of the cost of doing business. Contrary to the Administrator's allegation, we believe the facts will show that, if there are any such operators, they are extremely rare. Our member airlines do not condone such a practice; no one should be permitted to operate in this manner.

In our view, H.R. 7488 attaches exaggerated significance to the importance of increased civil and criminal penalties in achieving greater safety. If there are companies or employees anywhere in the aviation industry who flagrantly disregard the rules, the FAA is already well equipped to take appropriate action. In addition to the power to impose civil penalties and, for certain violations, criminal penalties, the Federal Aviation Act currently gives the FAA the ultimate authority to suspend or revoke operating, airworthiness, or airman certificates. Such action is undeniably effective, since it puts the unsafe operator out of business, or grounds the unsafe aircraft or airman. Equally drastic and effective is the FAA's existing authority to seize aircraft when circumstances so dictate.

Thus, the Administrator has ample authority under the current law to deal with any flagrant disregard for rules designed to assure safety in air transportation. Let us turn now to the adequacy of his power to deal with lesser violations. Notwithstanding the existing $1,000 limit on civil penalties, the Administrator has used various compounding approaches and collected civil penalties many, even hundreds of times that high from carriers. In one instance, he has sought to impose a $12 million penalty. Although there are serious questions about such compoundings of $1,000 penalties, which I will address in a moment, the fact remains that the Administrator believes he has such authority today.

I might mention that it is described in some detail in the FAA's Enforcement Handbook, and indeed was quite candidly discussed by one of the FAA witnesses yesterday when he mentioned that they used an approach which basically amounted to scraping the barrel in every possible way to build up these fine levels by compounding.

And the fact that each of the presently authorized methods for dealing with violations has been used-perhaps at times too sparingly and at times excessively-underscores our conviction that amendments of the far-reaching nature proposed in H.R. 7488 are unnecessary.

With regard to the CAB, the Secretary's transmittal letter made no attempt to justify an increase in the maximum penalties which can be imposed by the agency. We believe it would be particularly incongruous to increase the CAB's enforcment powers in the face of an overwhelming decison of Congress in October 1978 to phase the agency out of existence. Congress has placed its faith in the marketplace rather than Government regulation to produce and maintain the desired air transportation system. We urge this subcommittee not to turn back the clock by increasing the appetites of economic regulators to superimpose themselves upon the free exercise of management prerogatives.

We have explained why we believe that the various penalties currently authorized give the FAA ample power to enforce their regulations. We do recognize, however, that inflation may have reduced the effectiveness of a $1,000 civil penalty in dealing with certain offenses, and that a case can be made for selective increases. Specifically, when a violation directly affects safety and action upon a certificate would be too drastic in nature, an increase of the $1,000 limit could be justifiable. If the subcommittee should conclude that some increase in the $1,000 limit is necessary, we strongly urge that the $1,000 limit be retained for any violation that does not directly affect safety and that any increased limit be confined to those violations which the FAA finds to have resulted in the unsafe operation of an aircraft.

Let me turn now to the question of penalty compounding.

As I indicated earlier, we believe the subcommittee should also fully recognize the impact of the compounding of the $1,000 civil penalty limit. This has taken several forms. Probably the most common form is that authorized by the 1958 act, wherein each day of a continuing violation constitutes a separate offense. For example, when an operator discovers that there was a failure to enter certain required information into the records 5 days previously, corrects the mistake and so informs the FAA, the operator can become subject to a civil penalty of $5,000.

Another form of compounding which has been applied by both the FAA and the CAB is to allege that each passenger processed in violation of a regulation constitutes a separate offense. We believe this often goes well beyond the intent of the act. For example, an inadequate security check of 100 boarding passengers for a given. flight can trigger an FAA attempt to impose a $100,000 civil penalty.

Yet another compounding device entails imposing the maximum fine for a continuing violation to each flight performed. For example, in FAA's opinion, an alleged failure to document repair procedures properly in a carrier's own records can trigger a maximum assessment for each of hundreds of flights, even though the alleged recordkeeping deficiencies in no way affect the airworthiness or safety of the aircraft. In effect, there can be heavy fines assessed for slips in paperwork that in no way affect safety.

And last, another form of compounding is to charge the operator with the violation of several regulations for a single erroneous act of either commission or ommission. For example, a mechanic working on an airplane may make a mistake which may or may not affect its airworthiness. Upon learning of such an error, the FAA

often cites the airline for violation of three or four rules, all due to the single mistake, and holds the airline liable for a $3,000 or $4,000 civil penalty. Sometimes the FAA couples this with compoundings for the number of days or the number of flights, thus bringing the penalty assessment to what can become an unconscionable level.

We believe that this overzealous compounding activity should be contained. Otherwise, any limit set, whether it be $1,000 or $25,000, becomes almost meaningless. In our view, it would be appropriate for this subcommittee to register concern over possible excesses, and there may well be a need for specific legislative action to limit the extent to which such compounding is permitted. A relatively modest cap would be particularly appropriate for those violations which do not result in unsafe operations.

We have already discussed the incongruity of a dramatic expansion of the CAB's penalty powers at this point in time. The penalties contained in the FAA Act of 1958 and those proposed in H.R. 7488 apply not only to the FAA and the CAB, but also to the National Transportation Safety Board-NTSB-and to certain rules issued by the Postmaster General. In transmitting H.R. 7488 to the Congress, the Department of Transportation provided no explanation or justification for the proposed amendments as they may apply to these agencies.

In our prepared statement, we indicate why we do not feel increased penalties in those areas would be justified. In his opening remarks the chairman indicated that they were not seeking such increases, and we assume any bill which might be reported would not include such increases.

With respect to the regulations of the Postmaster General, the status of the U.S. Postal Service has changed significantly since the FAA Act of 1958 was adopted and we believe that consideration should be given to removing reference to the Postmaster General from title IX of the act. In view of the enactment of the 1971 Reorganization Act and the deregulation of our industry, it seems anomalous to leave this airline customer, the Postal Service, with the ability to impose penalties upon us. We would be pleased to present our further thought in this regard to this subcommittee or any other appropriate committee at any time.

On the subject of criminal penalties, H.R. 7488 proposes that the criminal penalty provisions of the Act be expanded to cover title VI violations and to include imprisonment as a penalty for title VI violations and a host of other violations. We do not believe either expansion is warranted in view of the broad enforcement authority already granted by the 1958 act. Certificate actions, monetary penalties, and aircraft seizures are the appropriate harsh response to severe, knowing and willfull safety violations, and imprisonment is an excessive response to the myriad technical, reporting, and recordkeeping violations which would be covered by this proposal.

H.R. 7488 further proposes certain amendments to the review and appeal procedures relating to enforcement actions. If the act is to be amended, we would agree with the proposal to provide for administrative review of FAA civil penalties-in addition to certificate actions-by the NTSB, but we think the ceiling for penalties

subject to such review should be $25,000 rather than $10,000 as proposed.

We oppose the proposed amendment which would permit the DOT Secretary to obtain judicial review of an NTSB order resulting from an appeal to the NTSB. Such a proposal was made when the 1958 act was being drafted and was rejected by the Congress. In our view, it is a sound Federal policy and practice that, in a controversy between a Federal Government agency and a member of the public, once the agency with all its resources has lost an appeal heard by an independent Government body, the agency should not have a further right of appeal. Its philosophy is reflected not only in the current provisions of section 609 of the Federal Aviation Act, but also in the Administrative Procedure Act and the Independent Safety Board Act of 1974, and we see no justification for a change at this time.

Before concluding, we wish to call to your attention the fact that the General Accounting Office is currently conducting a review of FAA enforcement activities. The subcommittee may wish to determine whether this GAO study can be expected to produce information which might be useful to the consideration of H.R. 7488. Mr. Chairman, we have appeared here today in an effort to explain why we feel that H.R. 7488 is not a necessary step for the enhancement of aviation safety-an objective which everyone supports-nor is it a mere 1980 adjustment to the impact of inflation since 1938. It is excessive in its reach and in its present form does not merit favorable action by this subcommittee. If you do conclude that some legislative action is required, we urge you to give favorable consideration to the suggestions we have made in the course of our testimony. We stand ready to assist the subcommittee and its staff in any way, should you so desire. At this time, we will be pleased to answer any questions you may have.

Mr. FARY. Thank you for your testimony. We will now recess for 15 minutes pending a vote.

[Brief recess.]

Mr. FARY. May we proceed with the questioning, Mr. Landry. In your testimony you support the H.R. 7488 provision allowing NTSB to review FAA civil penalty decisions. You urge a $25,000 ceiling on penalties which could be reviewed by NTSB. Is it your position that a penalty case over $25,000 would have to be tried by U.S. District Court? Why shouldn't the accused have at least the option of going to NTSB in all cases?

Mr. LANDRY. We think that would be an acceptable alternative to cutting it off at $25,000. But, we thought that perhaps a full test of the administrative review process at a $25,000 cutoff level might be useful. We recognize, for example, there are manpower limitations at the NTSB. We do think it is useful to have the expert body, however, review these rather than going to the court system routinely.

Mr. FARY. In your testimony you state that it will be appropriate for this subcommittee to register concern over possible excesses, and there may well be a need for specific legislative action to limit the extent to which such compounding is permitted.

When one considers possible excesses, the recent large penalties assessed against some of your members immediately come to mind.