	Significant External and Internal Demands Will Challenge FAA’s Current and Evolving Operations

FAA faces significant demands that will challenge its ability to operate  both in the current environment and in what it expects to encounter in the  coming decade. With the industry still attempting to recover from the most  tumultuous period in its history, FAA’s funding is constrained by lowered  Airports and Airways Trust Fund receipts and increased pressure on the  contribution from the General Fund. To meet its current and future  operational challenges, FAA is facing demands for greater efficiency and  accountability. The U.S. Commercial Aviation Industry Is Still Recovering From Unprecedented Financial Chaos

Since 2001, the U.S. airline industry has confronted financial losses of  previously unseen proportions. As a result, the total amount of transportation taxes that  were remitted to the Trust Fund declined by $2.0 billion (19.6 percent)  between fiscal years 1999 and 2003 (in 2002 dollars). Clearly, a major challenge for FAA both now and into the future will be  cost-cutting and cost control. Operating costs represent over half of FAA’s budget. FAA’s  most recent forecasts project significant increases in overall system  activity by 2015. Despite Personnel and Acquisition Reforms, Systematic Management Issues Continue to Impede ATC Modernization

Over the years, systematic management issues, including inadequate  management controls and human capital issues have contributed to the  cost overruns, schedule delays, and performance shortfalls that FAA has  consistently experienced in acquiring its major ATC modernization  systems. ATC Projects Continue to Experience Cost, Schedule, and Performance Problems

FAA established its current acquisition management system (AMS) in 1996  following acquisition reform. The ongoing challenges facing air traffic control modernization  efforts led Congress and the administration to create a new oversight and  management structure through the new Air Traffic Organization (ATO) in  order to bring the benefits of performance management to ATC  modernization. The ATO was designed to bring a performance management  approach to ATC modernization efforts. FAA’s Future Success Hinges on Several Critical Success Factors

To successfully meet the challenges of the 21st century, FAA must  fundamentally transform its people, processes, technology, and  environment to build a high-performing organization. Specifically,  the key characteristics and capabilities of high-performing organizations  fall into four themes as follows:    A clear, well-articulated, and compelling mission. Strategic use of partnerships. Focus on needs of clients and customers. However, over the years, FAA’s efforts to meet client and customer needs  have not always been successful, and some have had a long lasting  negative impact. Strategic management of people. While FAA has taken some promising steps through its new ATO to  restructure itself in a manner consistent with high-performing  organizations, the agency still faces significant and longstanding systemic  management challenges. Our work for more than two decades  has shown that even modest organizational, operational, and technological  changes at FAA can be difficult and time consuming, all of which  underscores the difficult road ahead for FAA and its new ATO.
Why GAO Did This Study

Over the last two decades, FAA has experienced difficulties meeting the demands of the aviation industry while also attempting to operate efficiently and effectively. Now, as air traffic returns to pre- 9/11 levels, concerns have again arisen as to how prepared FAA may be to meet increasing demands for capacity, safety, and efficiency. FAA's air traffic control (ATC) modernization efforts are designed to enhance the national airspace system through the acquisition of a vast network of radar, navigation, and communication systems. Nine years have passed since Congress provided FAA with personnel and acquisition reforms. However, projects continue to experience cost, schedule and performance problems. FAA's Air Traffic Organization (ATO) is its most current reform effort. Expectations are that the ATO will bring a performance management approach to ATC modernization. This statement focuses on three main questions: (1) What are some of the major challenges and demands that confront FAA? (2) What is the status of FAA's implementation of reforms and/or procedural relief that Congress provided? and (3) What are some of the critical success factors that will enable FAA to become a highperforming organization?

What GAO Found

A forecasted increase in air traffic coupled with budgetary constraints will challenge FAA's ability to meet current and evolving operational needs. The commercial aviation industry is still recovering from financial losses exceeding $20 billion over the past 3 years. Many airlines cut their operating expenses, but FAA's budget continued to rise. However, transportation tax receipts into the Airport and Airways Trust Fund, from which FAA draws the majority of its budget, have fallen by $2.0 billion (nearly 20 percent) since 1999 (in constant 2002 dollars). Cost-cutting and cost-control will need to be watchwords for FAA from this point forward. FAA has implemented many of the reforms authorized by Congress 9 years ago, but achieved mixed results. Despite personnel and acquisition reforms the agency contended were critical to modernizing the nation's air traffic control (ATC) system, systemic management issues continue to contribute to the cost overruns, schedule delays, and performance shortfalls. FAA's most current reform effort, the Air Traffic Organization (ATO) -- a new performance-based organization mandated by AIR-21 that is operating the ATC system is just now being put in place. To meet its new challenges, FAA must fundamentally transform itself into a high-performing organization. The key characteristics and capabilities of high-performing organizations fall into four themes: (1) a clear, well articulated, and compelling mission; (2) strategic use of partnerships; (3) focus on the needs of clients and customers; and (4) strategic management of people. FAA has taken some promising steps through its new ATO to restructure itself like high-performing organizations, but still faces significant and longstanding systemic management challenges. Even modest organizational and operational changes at FAA can be difficult and time consuming.