An overhaul of the U.S. air traffic control system that would help airlines navigate crowded air routes is likely to be further delayed by U.S. budget cuts, the head of the nation’s chief defense and aerospace industry lobbying group said on Thursday.

NextGen, a staged program that will shift air-traffic control systems to global positioning satellites from radar, requires about $1 billion a year in federal investment and is expected to be completed in 2025, Marion Blakey, chief executive of the Aerospace Industries Association, said at the Reuters Aerospace and Defense Summit.

It is the biggest aviation infrastructure upgrade since radar in the 1940s, she added.

However, budget cuts required by sequestration – a procedure in U.S. law that limits the size of the federal budget – may prompt the Federal Aviation Administration to raid money set aside for infrastructure projects and use it to pay for ongoing expenses, Blakey said.

“The chances are excellent that the investment accounts will be hit much the hardest,” she said, speaking at the Reuters office in Washington, D.C. Blakey is also a former FAA administrator.

“The investment that’s required can be derailed in the course of a single year – 2014 – by the sequestration cuts.”

When the government is faced with curtailing current operations, which is felt immediately, “usually what has to go is the R&D, the investments,” she said. “That’s what we very much fear because it’s eating this country’s economic seed corn in a terrible way.”

Delay of the NextGen system could affect the capacity of the U.S. air system, which is projected to handle 1 billion passengers in 2015, up from 780,000 in 2010. The impact could be felt especially at congested hubs where airlines already are “bumping up against” system capacity. That means a tiny hiccup in the system can cause many canceled flights at a hub.

Earlier on Thursday, United Continental Holdings Inc’s chief financial officer said the airline is using new slim seats and other measures to both upgrade planes and allow them to carry more passengers efficiently. John Rainey said he was concerned about sequestration’s effect on air traffic control and towers.

“The more important thing for us is really the air traffic control situation,” he told Reuters. “I’m glad it was rectified quickly” when the FAA got authority to shift money and end the furloughs, he said. “I hope that we would have a thoughtful approach to sequestration, not have any type of capricious cuts like that which would certainly hurt a particular segment of the economy more than others.”

Aerospace and airline executives expect U.S. air travel to increase about 5.5 percent a year. But some have raised concerns that growth could falter if the FAA is not able to keep control towers open or has to furlough air-traffic controllers once again, as it did earlier this year, because of budget cuts.

Blakey said she will leave soon for a conference in China to discuss airport infrastructure development there. The system is undergoing rapid growth and had large delays this summer.

Follow Reuters Summits on Twitter. For more summit stories, click here. Additional reporting by Paige Gance; editing by Matthew Lewis. 

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