Cessna Chairman Pelton Proposes Business Approach to Fund FAA

February 24, 2006

Washington, DC - February 24, 2006 – Calls to replace the aviation fuel tax with new user fees to fund improvements to U.S. airspace management are not supported by a business case, said Cessna Aircraft Company Chairman, President and Chief Executive Officer Jack J. Pelton today in a speech to government and industry officials at the Washington Aero Club. Pelton also serves as chairman of the General Aviation Manufacturers Association.

In remarks prepared for the address, Pelton outlined five myths about Federal Aviation Administration reauthorization:

  • Myth one: The mechanisms for funding the FAA are not working;

  • Myth two: A funding overhaul is needed to pay for modernization, and to cover revenue shortfalls from the declining commercial ticket tax;

  • Myth three: General aviation does not pay its share for its use of the National Air Transportation System;

  • Myth four: User fees will provide stable and predictable funding for the FAA; and

  • Myth five: Very Light Jets coming to market will place a new burden on the air transportation system.

"These myths have crept into the public discussion about FAA funding, and they have gained undeserved credibility," Pelton said. "I am a businessman, not a policymaker, and FAA officials often speak of the need to run the FAA more like a business. So, I propose we address some basic business questions before we implement more policies or procedures that could potentially add cost or make the system more burdensome than it already is. The questions we need answered are: Where does our aviation system stand today? Where is the market headed? What are the requirements we will have to meet?"

Pelton said an evaluation of the current funding system shows little need for new revenue streams – funding for the FAA has increased, not decreased, in the last decade. In addition, the FAA has not identified how the agency would use an increase in funds.

"The FAA has said extra funding is needed to modernize the system, but with little details on what that means," Pelton said. "How would a business evaluate future capital investment needs? We would conduct studies to determine where the market is going, what are the must-haves, what are the nice-to-haves, and so forth, to meet those challenges. Once we had finished sizing the needs, only then would we consider the best ways to provide the funding. Then we would ask what expenditures can be reduced and what new revenue sources can we tap or develop."

The FAA has not provided answers to these foundational questions, he said.

"I would have a tough time getting funding to develop a new airplane if I could not lay out what we wanted to build, why, what it would cost, and how long it would take," he added.

Pelton said he is not suggesting business aviation should not help pay for the air transportation system. Business aviation does pay to use the system through a fuel tax, which he said should continue because it is a non-bureaucratic way to contribute.

"General aviation represents only about 3 percent of all operations at our nation's 20 busiest and costliest airports," Pelton said. "The air transportation system was built to accommodate airline operations – in particular, to accommodate peak traffic at airline hubs. The principle drivers of the costs of the system are the infrastructure and support networks to handle those operations at hub airports."

As an example, Pelton said, Ronald Reagan National Airport in Washington was closed to general aviation traffic for four years, yet the costs of operating the airport did not decrease.

As to the suggestion that the FAA go to a user-fee system, Pelton said, the track record of aviation user-fee systems in Europe and Canada "tells us that the mechanism becomes very unstable in economic downturns. As a result, government bailouts are required, or fees must be increased just when the industry is least able to afford the spike in costs."

Finally, he said, the argument that the new, very light jets (VLJs) will take off and overwhelm the nation's air traffic system, is completely unrealistic. "This is a topic I know rather well," Pelton said of the new VLJ aircraft.

"Even if the most optimistic predictions about VLJs turn out to be true, we will not see large numbers entering the system over the next five years. That means we have time to see how this market truly develops," he told the aviation audience.

Pelton proposed continued investment in the National Air Transportation System, with a higher contribution to the FAA from the General Fund; modernization with satellite and other technologies to increase efficiency; keeping the current revenue structure, including general aviation fuel taxes; rejecting user fees for general aviation; and ensuring continuing congressional authority.

He concluded by saying, "I'm confident that by working together on this platform we can help affect policy decisions that are more enlightened, more realistic, more equitable and more cost effective. And I am confident that these policy decisions will result in a goal we all want to achieve – a strong, sustainable aviation system for our nation."

Based on unit sales, Cessna Aircraft Company is the world's largest manufacturer of general aviation airplanes. In 2005, Cessna delivered 1,157 aircraft and reported revenues of about $3.5 billion. Since the company was originally established in 1927, more than 187,000 Cessna airplanes have been delivered to nearly every country in the world. The global fleet of more than 4,500 Citations is the largest fleet of business jets in the world. More information about Cessna Aircraft Company is available at www.cessna.com. Cessna is a subsidiary of Textron Inc. (NYSE: TXT).

Textron Inc. is a $10 billion multi-industry company with 46,000 employees operating in 36 countries. The company leverages its global network of aircraft, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna Aircraft, Jacobsen, Kautex, Lycoming, E-Z-GO and Greenlee, among others. More information is available at www.textron.com.

Forward-looking Information: Certain statements in this report and other oral and written statements made by Textron from time to time are forward-looking statements, including those that discuss strategies, goals, outlook or other non-historical matters; or project revenues, income, returns or other financial measures. These forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including the following: [a] changes in worldwide economic and political conditions that impact interest and foreign exchange rates; [b] the interruption of production at Textron facilities or Textron's customers or suppliers; [c] Textron's ability to perform as anticipated and to control costs under contracts with the U.S. Government; [d] the U.S. Government's ability to unilaterally modify or terminate its contracts with Textron for the Government's convenience or for Textron's failure to perform, to change applicable procurement and accounting policies, and, under certain circumstances, to suspend or debar Textron as a contractor eligible to receive future contract awards; [e] changes in national or international funding priorities and government policies on the export and import of military and commercial products; [f] the adequacy of cost estimates for various customer care programs including servicing warranties; [g] the ability to control costs and successful implementation of various cost reduction programs; [h] the timing of certifications of new aircraft products; [i] the occurrence of slowdowns or downturns in customer markets in which Textron products are sold or supplied or where Textron Financial offers financing; [j] changes in aircraft delivery schedules or cancellation of orders; [k] the impact of changes in tax legislation; [l] the extent to which Textron is able to pass raw material price increases through to customers or offset such price increases by reducing other costs; [m]Textron's ability to offset, through cost reductions, pricing pressure brought by original equipment manufacturer customers; [n] Textron's ability to realize full value of receivables and investments in securities; [o] the availability and cost of insurance; [p] increases in pension expenses related to lower than expected asset performance or changes in discount rates; [q] Textron Financial's ability to maintain portfolio credit quality; [r] Textron Financial's access to debt financing at competitive rates; [s] uncertainty in estimating contingent liabilities and establishing reserves to address such contingencies; [t] performance of acquisitions; [u] the efficacy of research and development investments to develop new products; [v] bankruptcy or other financial problems at major suppliers or customers that could cause disruptions in Textron's supply chain or difficulty in collecting amounts owed by such customers; and [w] Textron's ability to execute planned dispositions.

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Eric Salander, Vice President, Investor Relations
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