The U.S. aviation industry won't face immediate disruptions if
political leaders can't reach a deal to avert automatic budget cuts
due to start Jan. 2, a senior Transportation Department official
told employees Wednesday.
The Federal Aviation Administration and other agencies would have the remainder of the fiscal year that ends Sept. 30 to adjust to budget decreases, John Porcari, DOT's deputy secretary, said in an email obtained by Bloomberg.
The FAA would have to reduce its budget of $15.9 billion by $1.04 billion, or 6.5 percent, if lawmakers don't come to terms on a tax and spending package, according to an Office of Management and Budget report.
The effect of the so-called "fiscal cliff" is a different situation from the partial FAA shutdown in 2011 after Congress failed to reauthorize funding for the agency, Porcari said. That action forced the FAA to halt payments for airport construction and furlough about 4,000 employees for 16 days.
"Cuts of this magnitude cannot be implemented without a significant impact in operations and capacity," the National Air Traffic Controllers Association, the union representing about 15,000 controllers, said earlier.
FAA Administrator Michael Huerta said Sept. 24 that the cuts would cause a "drastic" reduction in agency services. The agency would be forced to reduce staffing, slow technology upgrades and disrupt certification of new aircraft, he said. "They would result in significantly less efficient and less convenient air travel service."
A study funded by the Aerospace Industries Association predicted that airline and cargo flight reductions of as much as 10 percent or cuts to air-traffic technology projects that could trigger flight delays for decades. As many as 132,000 jobs could be lost across the U.S. and economic losses could reach $40 billion a year by 2021, according to the study.
Even a short period in which the FAA reduced air-traffic service would cause difficulties for airlines and cargo haulers and trigger ripple effects, said Stephen Mullin, senior vice president at Econsult Corp.
"You could have some potentially tough disruptions for some segments," he said.
So far, the FAA hasn't given the industry a clear idea of where it would cut and what effect that would have, said Debbie McElroy, an executive vice president with the Airports Council International- North America trade group.
"We understand that day-to-day operations won't change dramatically on Jan. 2, but we remain concerned about the potential impact on airports and passengers," she said.
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