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Airport Policy and Security Newsletter #51

bob.poole@reason.org (Robert Poole) — Thu, 05 Nov 2009 00:00:00 EST

In this issue:

GAO on TSA Screening Technology
Hub Airlines and Congestion Delays
Bogus Arguments on Private Screening
Gatwick Airport Sale and Other Privatizations
Porter Airlines Breaks the Mold
News Notes
Quotable Quote

GAO Rips TSA Screening Technology Development

We all want to believe that better technology holds the key to easing our way through passenger screening checkpoints. But the way the Transportation Security Administration is going about doing the R&D, testing, and deployment of better technologies leaves a great deal to be desired. That's the message of the latest report on aviation security by the Government Accountability Office, released last month (GAO-10-128, October 2009).

One key finding is that after years and years of rhetoric about risk-based policy from both TSA and its parent agency, the Department of Homeland Security (DHS), "TSA's strategy does not incorporate some key risk management principles-a risk assessment, cost-benefit analysis, and performance measures." Those principles are required by DHS's National Infrastructure Protection Plan (NIPP). TSA responds blithely that it takes risks into account by analyzing threat information, but GAO points out that the NIPP requires a systematic process of doing risk analysis based on threat, vulnerability, and consequence assessments. TSA admits that it has not yet conducted cost-benefit analysis to set priorities for checkpoint screening or established performance measures for deployed technologies. But as the GAO report points out, without doing these things, "TSA cannot ensure that it is targeting the highest priority security needs at checkpoints, measure the extent to which deployed technologies reduce the risk of terrorist attacks, or make needed adjustments to its [checkpoint] strategy."

At the request of the senior members of Congress who called for this report, GAO used the infamous "puffer machines" as a case study in poor decision-making. TSA deployed 101 of these Explosive Trace Portals (ETPs) to airports in 2006, despite the fact that it had done no testing outside of laboratory conditions. They broke down frequently due to dirt and humidity in the airport environment (not to mention that they slowed down throughput compared with walk-through metal detectors). Most are no longer being used, some have been removed, and another 116 that were bought but never deployed remain in storage.

Going forward, GAO acknowledges that TSA, after repeated prodding, has completed a strategic plan for passenger checkpoints that includes goals and objectives-but it has not conducted a risk assessment as part of that process. It has not assessed the vulnerabilities of the checkpoint technologies currently in place, nor the tactics terrorists could use to bypass or spoof them. "TSA lacks a method to systematically test and identify vulnerabilities in its passenger and baggage screening equipment in an operational airport setting." It has not completed a cost-benefit analysis to help set risk-based priorities and guidelines for developing and selecting among new technologies. And it lacks measures to evaluate the extent to which its checkpoints reduce the risk of terrorist attacks.

A section toward the end of the report also makes dismaying reading. It summarizes DHS's response to the report's eight recommendations, all of which the agency said it agrees with. In most cases, however, the GAO states its concerns that the agency either doesn't really mean it or that the actions it says it will take will not (or not fully) address the intent of the recommendation. In two cases, GAO cannot provide a detailed explanation of its concerns, because "TSA determined our evaluation to be sensitive security information."

These are still early days of the Obama administration. I hope DHS Secretary Janet Napolitano and new TSA Administrator Erroll Southers will take this report seriously.

Do Hub Airlines "Internalize" Congestion Delays?

Although most economists who have studied delays at congested airports recommend some form of pricing to bring peak demands into conformity with runway capacity, the past decade has seen several studies claiming that airlines with a dominant position at hubs (e.g., American at DFW or Delta at Atlanta) "internalize" the resulting delays-i.e., accept them as a cost of doing business at the hub (while appreciating that the congestion also deters new entrants from competing there during peak periods). The most cited of these studies was by Jan Brueckner in 2002, who ended up proposing that airport congestion prices should therefore be lower for the dominant hub carrier than for others.

I only recently came across a 2005 paper by economists Katherine Harback and Joseph Daniel which provides a new empirical test of the internalization argument: "(When) Do Hub Airlines Internalize Their Self-Imposed Congestion Delays?" (University of Delaware Department of Economics, Working Paper No. 2005-08) They developed a model of airport congestion and used flight data from 27 major U.S. airports to test whether dominant airlines internalize such self-imposed congestion-- or ignore it. Most of their statistical tests reject the internalization hypothesis. Another test showed that "flights operating during typical large interchange banks at nearly all the highly congested airports do not internalize delays." These results apply to Atlanta, Charlotte, Washington National, Denver, Dallas, Detroit, Newark, Houston, JFK, Minneapolis/St. Paul, Chicago O'Hare, Pittsburgh, San Francisco, and St. Louis. Two notable omissions from this list are LaGuardia and Los Angeles, neither of which has a large dominant carrier, and both of which have high traffic in relation to capacity essentially all day long.

Harback and Daniel conclude with policy recommendations. They argue that any policy to reduce airport congestion should focus on both increased efficiency and increased competition. "Properly implemented, congestion pricing would improve flight connection times for airlines at their own hub airport, while imposing only minor scheduling delays (often less than 15 minutes) from their most preferred operating times at their non hub airports." Moreover, they write, "Hub airlines should support congestion pricing as a means of reducing self-imposed congestion while pricing other airlines out of their periods of peak bank operations." This approach, they maintain, should be considered pro-competitive because, "while it strengthens the local hub, it means that other airlines will be able to provide moe rapid connections at competing hubs. By improving connecting service, there would be more viable competition or potential competition in many origin-destination markets, putting downward pressure on fares."

If You Outsource Airport Screening, Watch Out for Bogus Arguments

Last month the airport board of Glacier Park International Airport in Montana voted to shift from TSA-provided passenger and bag screening to contract screening, under TSA's Screening Partnership Program (SPP). Airport director Cindi Martin had been complaining for years about inadequate screener staffing, especially during the tourist season. TSA has repeatedly reduced the airport's allocation of screeners, which it re-calculates once a year, based on passenger numbers in October (a quiet month at Glacier Park). Although TSA supplements the screener workforce in the summer as best it can via its National Deployment Officers (a kind of flying squad of screeners), that has not been enough to prevent long lines and passenger complaints.

Unfortunately, much of the news coverage of the airport's decision has focused on fears and complaints from the current TSA workforce. In particular, they cite a "GAO report" that found that screening by TSA-approved contractors costs 17% more than screening done by TSA itself. For example, screener Eric Wood was quoted as saying, "To try to increase and add an extra layer of bureaucracy, it seems ludicrous in this economy. Dollar for dollar, it's going to cost you [the taxpayer] more money, and you're not going to get a better product." Even airport director Martin accepts the alleged GAO finding of 17% higher cost, but thinks the reduced lines will be worth it.

The study they both are referring to says nothing of the sort. I reviewed the report (GAO-09-27R) back in February 2009 (Issue No. 42). What GAO did was to review two reports on the costs and performance of screening under the SPP versus TSA-provided screening, one by Catapult Consultants (hired by TSA to do an independent assessment) and the other by the TSA itself. The Catapult report (which has not been made public but is well-summarized by GAO) appears to have been well done. First, Catapult compared six SPP airports with a matched set of TSA airports. The reported costs were, indeed, 17.4% higher, on average, for the six SPP airports. To get a broader picture, Catapult created a regression model using data from all 450 airports with screening, and four years worth of data. That exercise showed 9% higher costs at SPP airports.

But that's not the end of the story. TSA evidently didn't like the Catapult report, because it found (as had previous outside studies) that "SPP airports' overall performance results are equal to or better than those delivered by non-SPP airports." It also noted that TSA assigns administrative and overhead costs at SPP airport that artificially inflate the reported cost of screening there. So TSA did not release the Catapult study; instead, it produced its own quick & dirty "study" using only one year of data (rather than Catapult's four).

What GAO did, in so many words, was to blow the whistle on this skullduggery, by summarizing and contrasting the Catapult and TSA reports. GAO noted that TSA's recorded costs of screening (used in both of those reports) omit such key items as workers comp, general liability insurance, and some retirement costs for TSA screeners that are not in TSA's own budget. And the cost comparison also neglects the revenue the federal government gets in income taxes from the SPP companies. And because TSA did not compare cost with performance, GAO said that "We believe that TSA should not use [their] study as sole support for major policy decisions regarding the SPP."

In short, the arguments being raised in opposition to Glacier Park's decision are bogus, and it's absurd to cite the well-done GAO report to argue against an airport's decision to go with the SPP option. Frankly, I think the airport trade groups-AAAE and ACI-NA-should have done a better job informing their members about the Security Partnership Program. Small-town airport directors like Cindi Martin should not have to rely on this newsletter to learn the facts about this useful program.

P.S.: Seven smaller Montana airports have already joined SPP this past summer, and both Butte and West Yellowstone have applications pending, in addition to Glacier Park.

Gatwick Sale Revives Airport Privatization

Early in 2009, when Chicago's attempt to lease Midway Airport failed for lack of financing, many observers pronounced the end of a short-lived era of infrastructure privatization, that had begun in 2005 with the lease of the Chicago Skyway. In fact, only last week a poorly researched article in USA Today was headlined "Privately Run Infrastructure Deals Dry Up." Only days before, the financial news media announced that Global Infrastructure Partners had purchased London Gatwick Airport from BAA for $2.47 billion. Doesn't sound very dried up to me!

GIP is a $5.64 billion infrastructure fund, one of nearly a hundred worldwide that have raised substantial sums (in excess of $100 billion) to purchase or long-term lease key infrastructure enterprises. GIP is backed by Credit Suisse and General Electric. It already owns the small but growing London City Airport, a U.S. natural gas pipeline, a British port, and a British waste-management company. It is also considering a bid for one of BAA's Scottish airports.

The fact that the Gatwick deal got done, and at a reasonable price, in today's financial markets is a good sign for other planned infrastructure deals-including other airport privatizations. I've reported in recent issues on announced plans for privatization of New Orleans' Louis Armstrong International and Rio de Janeiro's Galeao International Airport. Both of those planned deals look more credible today than they did a month ago, thanks to Gatwick.

And then there's Sheremetyevo, Russia's second-largest airport (in Moscow). Since the collapse of the USSR, it has lost ground to privately managed Domodedovo, the other main Moscow airport. But last month Russia's Transport Ministry announced plans to privatize Sheremetyevo in 2010, in a deal estimated to be worth €1.5 billion. The winning bidder will be expected to pay for building a third runway as well as terminal modernization projects. Even Kosovo has its principal airport on the market.

To be sure, some of these airports will be easier to finance than others-and some may not attract serious bids, depending in part on how fast credit markets recover. But it's good to see that investor interest in the airport sector is picking up again.

Porter Creates Important Niche Market

For several months I've been following with great interest start-up airline Porter Airlines. It began service just three years ago (October 2006), operating out of Toronto City Center Airport, a small airport adjacent to the Toronto central business district. Today it provides regional service to Montreal, Ottawa, Quebec City, Chicago, Boston, New York (Newark), Halifax, Thunder Bay, and St. Johns, using Bombardier Q400 twin turboprop aircraft. By next spring, its fleet will consist of 20 of these quiet, fuel-efficient planes. As a low-cost but high-service airline (free beer, wine, and snacks on board; coffee and newspapers at the airport), it has led to dramatic fare reductions on routes it has entered these past three years.

Porter is a wholly owned subsidiary of Porter Aviation Holdings, Inc., backed by Edgestone Capital Partners, Borealis Infrastructure, GE Asset Management, and Dancap Private Equity. The company has a 50-year history operating other regional airlines in Canada. It also provides the Fixed Base Operator service at Toronto City Center Airport.

The airport is owned by the Toronto Port Authority, and its continued existence as an airport was in question only a few years ago. Apparently, the city government had considered taking over the property and converting it to other uses, a move that would have been popular with a nearby residents' group called Community Air. That group has opposed-to no avail-Porter's currently-under-way project to expand the terminal to a 10-gate configuration with jet-bridges (which passengers will certainly appreciate during Toronto winters). The first phase is to open this fall, with completion of the $45 million project by next summer.

Porter CEO Robert Deluce told Airport Business (August 2009, p. 16) that the company has identified 17 additional destinations, all within a 500-mile range of Toronto City Center Airport, as possible service additions. Deluce better move fast, in my view, since Air Canada Jazz is considering moving into City Center. The airport's small size limits its capacity, and Porter reportedly already uses a large majority of all available slots.

Porter's success in identifying and serving regional markets-and from a downtown airport close to a huge concentration of business people-causes me to once again reflect on the hubris of those who want to take untold billions from general taxpayers to displace self-supporting short-haul airline service with heavily-subsidized inter-city rail. Other cities could do as Toronto has done, providing airport capacity tailored to short-haul, turboprop (perhaps STOL?) service, with entrepreneurial airlines paying for terminal space and runway access. And because of the flexibility of air service, decisions about which cities to serve would be made by individual carriers, responding to the market demands their efforts would discover. Contrast that with the hugely politicized process of deciding which cities will be on the route of a tax-funded rail service-and the "sunk" nature of the cost of the rail infrastructure if those decisions turn out to be flawed.

My hat's off to Porter-and to the enlightened Toronto Port Authority.

News Notes

Should AIP Help Implement NextGen?

At the Air Traffic Control Association annual conference last month, the Colorado Dept. of Transportation (which funded a wide-area multilateration surveillance system that will dramatically increase runway throughput at airports in the mountains) argued that the federal Airport Improvement Program should fund such projects. And the Aviation Week Airports weekly for Oct. 27th quoted FAA associate administrator for airports Catherine Lang as agreeing. "What Colorado paid for was not AIP-eligible, but it's a fair question to ask, why not?" she told the newsletter. I agree; a lot of critical NextGen technology can increase runway throughput, and that seems likely to offer many project opportunities with higher ratios of benefits to costs than many current AIP grants.

Delta to Up-Gauge at LaGuardia

How times change! Two years ago as I was drafting Reason Foundation's proposal for congestion pricing at the congested New York airports, Delta was among the carriers denouncing the idea, and one of its arguments was that "up-gauging won't happen" because airlines needed numerous commuter planes to feed traffic to their longer-haul flights. But now that Delta has acquired 125 LGA slots from US Airways, "Delta plans to accomplish its expansion through larger jets," replacing turboprops operated by US Airways Express.

Use-It-or-Lose-It Exemptions

While I'm not a fan of airport slot controls (much preferring runway pricing to deal with congestion), when such controls exist, I support use-it-or-lose-it regulations to prevent incumbent carriers from hoarding unused slots in order to keep out competitors. Hence, I hope the EU Council of Transport Ministers continues to ignore pleas from the Association of European Airlines to extend the summer 2009 waiver of the 80% rule into the winter season and summer 2010. On the other hand, I can see the logic of the FAA agreeing last month to waive its use-it-or-lose-it rule at New York's JFK airport from March through November, while a major runway is taken out of service for a resurfacing and widening project. This will permit carriers at JFK to reduce their schedules during this period so as to prevent much worse delays and congestion.

Manchester Airport Exempts Kids from Body Scanning

Last month the UK's Manchester began a year-long trial of a checkpoint body scanning machine. A group called Action on Rights for Children objected, claiming that using the device on children would violate the Protection of Children Act of 1978, which makes it illegal to "make" or "show" in indecent image of a child. Two days later, the airport caved, announcing that children will be exempted from going through the RapiScan machine. Since UK law defines children as anyone under the age of 18, terrorist groups now have received what amounts to an invitation to use 16 and 17-year-olds as suicide bombers on planes departing Manchester.

Quotable Quote

"Each item confiscated [at passenger checkpoints] is presumed to have potential explosive, highly flammable, or other characteristics that could endanger life and property. As I understand it, federal health and public safety regulations require that any such suspicious item be isolated until it can be handled by experts, properly attired in protective gear, who would then transport it in an explosion-proof container to a protected laboratory test cell where it would be photographed, x-rayed, measured, weighed, and documented prior to being opened up and examined by remote means to avoid injury to personnel. . . . Why is it that the public safety bureaucrats haven't raised a single eyebrow at the way the TSA folks blithely toss these potential weapons of mass destruction around inside airport terminals full of people? Could it be that they, too, are in on the little secret that this is all just security theater?"

--Aviation reporter (name withheld by request), on an aviation list-serve, Oct. 16, 2009.

Airport Policy and Security Newsletter #50

bob.poole@reason.org (Robert Poole) — Sat, 31 Oct 2009 00:00:00 EDT

Brookings on Air Travel Delays
Will Registered Traveler Rise Again?
Increasing Runway Throughput
Unionizing TSA Screeners
LAX vs. Airlines, Again
GAO on Flawed Access Control
News Notes
Quotable Quote

Brookings on Air Travel Delays: Two-Thirds Right

The Brookings Institution has released a well-done report on the looming problem of increased air travel delays. "Expect Delays: An Analysis of Air Travel Trends in the United States," provides a well-timed warning of the likely return of serious airline delays once economic growth resumes and makes three major policy recommendations. (www.brookings.edu/reports/2009/1008_air_travel_tomer_puentes.aspx).

As a product of the think tank's Metropolitan Policy Program, the report focuses on America's urban areas, which are the source of most air travel. Nearly 99% of all passengers arrive at or depart from one of the 100 largest metro areas, with 73% concentrated in just 26 major metro areas (the largest of which are served by multiple airports with scheduled air service). It's those 26 urban regions that account for most of the seriously delayed flights. Also, nearly half of all airline flights (but just 30% of all passengers) are routes of less than 500 miles, a fact which leads to one of the report's recommendations.

The authors contend that current aviation policy is not focusing resources adequately on those 26 congested regions. For example, only 21.8% of Airport Improvement Program grants (and just 19.9% of airport-related stimulus funds) went to airports in those 26 major metro areas in FY 2009, according to the report's analysis. So one of the three recommendations is to "empower the most congested metropolitan areas to enact congestion mitigation policies" such as runway congestion pricing, which would generate additional revenue while providing incentives to economize on runway use. For the longer term, the authors suggest revising the way the FAA's Future Airport Capacity Task (FACT) process works, to put more emphasis on congestion reduction in the 26 major areas. So far, so good.

A second recommendation is to accelerate the deployment of NextGen technologies and investments to the major airports so as to expand their operational capacities in the medium term, beginning with the kinds of "now-Gen" approaches proposed by the RTCA's recent task force on this subject. It's hard to think of anyone who would oppose this one.

More troubling is the report's third recommendation: to prioritize high-speed rail project selection to focus on short-haul corridors (400 miles or less) where rail could substitute for airline service, thereby easing congestion at the airports at one or both ends of those routes. The 10 busiest corridors of this type, ranging from 185 miles to 358 miles, are Los Angeles-San Francisco, Los Angeles-Las Vegas, Los Angeles-Phoenix, Dallas-Houston, Boston-New York, New York-Washington, Los Angeles-San Jose, Dallas-San Antonio, Chicago-Minneapolis, and Dallas-Austin. Thus, we have four routes from LA, the two principal NE corridor shuttle routes, three in Texas, and one in the Midwest.

True high-speed rail service has in fact captured significant market share from airlines in selected cases: London-Paris, Paris-Lyon, Barcelona-Madrid, Frankfurt-Cologne, Tokyo-Osaka, in particular. And even moderate-speed Amtrak service in the Northeast Corridor has significant market share in competition with the airline shuttle services. But these experiences do not support the report's assertion that such corridors offer opportunities to "begin making returns on investment as soon as possible." Based on the best available public information, while rail service in these high-demand corridors covers its operating costs, none covers its capital investment costs, which are paid for largely or entirely by general taxpayers. So what proponents of replacing short-haul air service with rail are actually calling for is heavy taxpayer subsidies for a new mode to compete with self-supporting (user-paid) airline service. It's as if air fares were set to cover only the operating and maintenance costs of that service-letting general taxpayers cover the costs of buying the planes, building the airports, and creating the air traffic control system.

The OECD's Joint Transport Research Center held an expert round table on the subject of airports, airlines, and high-speed rail last October in Paris. The discussion paper summarizing this meeting concluded that, "The benefits from high-speed rail mainly take the form of time savings compared to other modes, and possibly of congestion relief in other modes. Environmental benefits are minor. In fact, the benefits are outweighed by the costs (in particular the high fixed costs), except in cases where there is high density of demand and there are pressing capacity problems in air and road alternatives." (See JTRC Discussion Paper 2009-7 at www.internationaltransportforum.org). It also points out that low-cost carriers (LCCs) can provide services between regions instead of cities, which is what has happened not only in Europe but in short-haul markets in this country.

Consider the greater Los Angeles area, where five airports are linked to three in the San Francisco Bay Area, all with frequent non-stop service, mostly by LCCs. Now compare that with the route map of the proposed $40-60 billion California High Speed Rail system. It shows 10 stations in the Los Angeles metro area and nine in the Bay Area-but only one main line connecting the two regions. While there will presumably be a number of nonstop express trains from, say, Union Station in LA to the huge new station planned for San Francisco, service from most or all of the other metro-area stations will include numerous stops, making it difficult to compete with nonstop air service, say, from Anaheim to Oakland.

So I cannot agree with the Brookings report on this one. And given the likely politics that will govern the actual selection of federally funded passenger rail corridors, they are unlikely to be located where the Brookings researchers suggest.

New Life for Registered Traveler Program

On September 30th, the House Homeland Security Committee's subcommittee on transportation security and infrastructure protection held a hearing on the future of the Registered Traveler program. Testifying in favor of reviving the program as a risk-based security program-the original intent of Congress in 2001-were two of three companies interested in reviving the service, two business travel groups, and a major airport organization. Subcommittee chair Rep. Sheila Jackson Lee endorsed revival of the program as a risk-based program, a specified in HR 2200, the House-passed Transportation Security Administration reauthorization bill.

The TSA's John Sammon replied that the agency is awaiting the confirmation of its new Administrator, Erroll Southers, to decide how it will proceed on RT. That requires Senate action, as does enactment of a counterpart to the House bill. Thus far, I have not seen any draft Senate provisions on RT, but this could presumably be addressed at the conference committee stage, even if the Senate bill ends up without addressing the issue.

Three companies have expressed interest in buying the membership records of former Clear provider Verified Identity Pass from creditor Morgan Stanley: FLO Corporation, Henry, Inc., and a third that has not been publicly identified. FLO's Fred Fischer and Henry's Alison Townley both testified at the hearing, and both said they would offer special deals to former Clear members. Townley said her firm would enroll former members at no charge for the balance of their terms with Clear. Fischer said that FLO will partner with a service provider that has 1,000 enrollment locations across the country, making it easier for prospective members to sign up.

Both the Business Travel Coalition and the National Business Travel Association strongly endorsed revival of RT as a risk-based security program that would also offer passengers and airports much speedier checkpoint processing of vetted members. BTC's Kevin Mitchell noted the importance of subjecting applicants to a serious criminal history background check, as well as integrating the program with the ongoing Global Entry program (sometimes referred to as International RT) of Customs & Border Protection, TSA's sister agency. And Fischer noted that under the old TSA program, "not a single RT member was ever vetted using a criminal history records check," a point I have independently verified.

AAAE's Carter Morris noted that a risk-based trusted-traveler program was recommended by the October 2001 Rapid Response Team set up by then-DOT Secretary Norm Mineta, which led to the idea's inclusion in the landmark Aviation & Transportation Security Act of 2001, enacted the following month. This type of RT program was also endorsed by the 9/11 Commission, Morris reminded subcommittee members.

I'm encouraged by the strong level of interest in re-starting Registered Traveler as the kind of security program it was intended to be. I hope the Senate does its part to move the issue along, and I'm looking forward to a positive decision by the new TSA Administrator.

Using Technology to Increase Runway Throughput

Of the large airports on the FAA's list of those needing additional runway capacity, 18 have what are defined as "closely spaced" parallel runways. In clear weather, FAA safety regulations permit simultaneous approaches on those runways, on the basis that pilots can see each other and take action to avoid a collision if one drifts toward the other. But under reduced-visibility conditions, such simultaneous approaches are not permitted, which means runway throughput is dramatically reduced.

In the 1990s, the FAA approved a technology improvement called an e-scan Precision Runway Monitor (PRM) that would permit simultaneous approaches on runways 3,000 feet apart, instead of the usual 4,300 feet. Basically, this was an electronically scanned radar whose update rate was 4 to 5 times faster than old-fashioned rotating radar; hence, it could keep more accurate track of both planes' locations as they made simultaneous approaches. PRMs were installed at only a handful of airports. It's not that they didn't work, but that they were costly to buy and costly to operate.

But a new generation of technology is now here, providing a lower-cost alternative to e-scan PRM. Early this month, the first such system went live at Detroit Metropolitan Wayne County Airport. Developed by Sensis Corp., it's designed to work with the company's runway incursion prevention system ASDE-X, which is operational so far at 20 of the 35 major airports targeted by the FAA to get this system. Called PRM-A (for alternative), it builds on the detection capability of ASDE-X (which uses both airport surveillance radar and transponder data) by adding wide-area multilateration (WAM), which can keep track of aircraft within 30 nautical miles of the airport, with once-per-second updates. (Multilateration is a kind of triangulation, using an array of sensors over a geographical area.) Although it still requires a separate display (a modified Raytheon STARS platform) and controller in the TRACON, like conventional PRM, the PRM-A costs about half as much to acquire.

That's doubly good news, because the old PRM is no longer in production. Hence, for the 18 airports with closely spaced parallel runways, the cost of adding this capacity is now significantly less than it used to be. And those few airports with aging PRMs and very limited availability of spare parts now have an option for replacing them with new and better technology.

Thus far, the FAA has approved PRM-A only for runways as closely spaced as 3,000 feet, but some of the 18 airports on FAA's list have runways closer together than that. A 2005 paper presented at the24th Digital Avionics Conference in 2005 argued that for aircraft equipped with ADS-B/In, spacing could be reduced to as little as 750 feet. (This is reference 14 in Viggo Butler, "Increasing Airport Capacity without Increasing Airport Size," http://reason.org/news/show/1002975.html.) It should be a priority for FAA and companies like Sensis to figure out what it would take to permit safe simultaneous approaches to all the remaining runways-and to start planning to do so.

Unionization and TSA Screeners

One of the original provisions of the 2001 Aviation & Transportation Security Act was that due to the critical nature of their work, the newly created federal airport screening workforce would not be allowed to form unions or go on strike. That provision was not popular with unions or their supporters in Congress, but with a Republican in the White House until this year, the odds of changing the law (i.e., of being able to override a presidential veto) looked slim.

That was then; this is now. Two House committees-Oversight & Government Reform and Homeland Security-have recently approved legislation by Rep. Nita Lowey (D, NY) to grant collective bargaining power to most TSA employees. The move is strongly supported by the American Federation of Government Employees and the National Treasury Employees Union. While I have nothing against unions in general, I think it would be a mistake to change the status quo in the field of airport security. Here's why.

Thanks to various audits and reports from both the Government Accountability Office and the Department of Homeland Security Inspector General's Office, we know that there are ongoing performance problems in airport screening. Red-team efforts to sneak prohibited items through airport screening succeed more often than not. Failure rates on TSA's skills test for screeners have exceeded 50% this year, and go as high as 80% at some airports, but in response, both unions urged TSA to suspend use of those tests! AFGE is also seeking to have TSA clear the records of those who fail the tests, because screener compensation is tied in part to performance. In addition, employees who seriously fail can be (and are being) fired, and under current rules cannot be rehired. But wiping those failures from employee records could permit those who were fired to be rehired.

These union pressures are being exerted today from the outside; they would be a lot more effective if the unions officially represented TSA screeners from the inside. It seems to me that airport screening is already a weak link in the chain (as demonstrated by the red team results and the skills test failures). The last thing we need is institutional arrangements that would further weaken screener performance and accountability.

New Developments in Los Angeles Airport Leases Struggle

I last reported on the ongoing struggle between Los Angeles World Airports (LAWA), proprietor of LAX, and various airline tenants back in Issue No. 25, in April 2007. Recent months have seen two important developments in this saga, both of which move LAX further toward a market-based model for airport fees and charges and away from the once-standard residual-cost approach under which the larger airlines (those who signed up to long-term lease and use agreements) gained control over their facilities and only paid the "residual" costs of using the airport (what was left to be paid for after all non-airline revenue were taken into account). This approach was dropped for airside charges in the 1990s under Mayor Richard Riordan (though not without big-time litigation). Recent battles have concerned the landside charges-essentially space rentals.

In August the U.S. Court of Appeals for the DC Circuit ruled in favor of LAWA in a case brought by the mostly low-cost-carriers using Terminals 1 and 3 (Alaska, AirTran, Frontier, Midwest, Southwest, and USAirways). They had argued that LAWA's decision to increase their rental rates was discriminatory, because signatory airlines under long-term lease agreements were not getting their rates increased. The court tossed that silly argument, upholding a prior decision by U.S. DOT that the fees were not discriminatory, since LAWA plans to do likewise for the other airlines once their current leases expire.

But the court also ordered DOT to consider the Terminal 1 and 3 airlines' argument that LAX has monopoly power. That's a pretty amazing claim for those domestic, relatively short-haul carriers to make, since there are four other airports in the greater LA area, all of which serve LCCs providing similar types of service. But that loose end remains until DOT responds.

Another big decision was announced October 6th, concerning Terminals 7 and 8. The airport had sold bonds to pay for rebuilding those terminals in time for the 1984 Olympics, but bankrupt United Airlines had not made all the required debt service payments. LAWA has now reached a settlement with United and UMB Bank (as indenture trustee for the bondholders) over paying off $94 million in bondholder claims. LAWA and United settled on $75 million, with LAWA on the hook for the larger share. Under the deal, United will gradually shift to new market-based rental rates by 2014, while LAWA will regain full control of Terminals 7 and 8 and be able to implement a unified capital charge for all terminal facilities in the future. The deal is subject to approval by the U.S. Bankruptcy Court, and also by the LAWA board and the LA City Council.

Changing from an old paradigm to a new one is never easy or painless, but it looks as if LAX is nearing the end of this long struggle to gain control of its future.

GAO Rips TSA Over Flawed Access Control Pilot Program

I don't enjoy dumping on the TSA, but when the Government Accountability Office says, in very diplomatic language, "You blew it," I feel obligated to summarize their findings in plain language. In Issue No. 36 (June 2008), I reported that TSA had persuaded Congress to hold off on imposing a costly mandate that all airport employees undergo physical screening (like airline passengers) every time they moved between an airport's public areas and its secure areas, whether in the terminal or on the ramp. TSA promised a pilot program that would test various alternatives to 100% screening to see whether equivalent results could be achieved via less-costly methods.

Well, last month GAO issued its report, innocuously titled "Aviation Security: A National Strategy and Other Actions Would Strengthen TSA's Efforts to Secure Commercial Airport Perimeters and Access Controls." (GAO-09-399 at www.gao.gov) But don't let the title dissuade you: the meat of the report is GAO analysts ripping to shreds this so-called pilot program. The one-page summary is bad enough, with statements like this: "[C]lear conclusions could not be drawn because of significant design limitations, and TSA did not document key aspects of the pilot. . . . Because of severe limitations in the design and evaluation of the pilot, . . . it is unclear which method is more cost-effective."

You have to plow through 15 or 20 pages until you get to the heart of the critique. First, GAO reminds us that TSA itself in its 2008 Civil Aviation Threat Assessment cited the threat from airport insiders (i.e., "airport workers with access to secured areas")as "one of the greatest threats to aviation." Then, starting on p. 26, it describes four actions TSA has taken on this issue. In addition to the pilot program on employee screening, it began a separate program of random employee screening called ADASP, put in place more-stringent requirements for employee background checks, and began work on biometric credentialing.

The pilot program to compare 100% screening with random screening was flawed in that (1) it included only seven airports, (2) it lasted only 90 days, (3) it used a variety of techniques, making it hard to compare airports, (4) it had no baseline, and (5) there was limited evaluation of enhanced methods. In addition, there were "significant limitations on the estimated costs and effects of implementing either 100% or random screening nationwide." Thus, while the contractor that did the evaluation reported that random screening was more cost-effective, GAO says no such conclusion can be drawn from such limited and inconsistent results.

The Aviation Direct Access Screening Program (ASASP) is even more of a mess. Here GAO cites an October 2008 report by the DHS Office of the Inspector General (OIG) on how supposedly random screening was actually being carried out in the field. "[A]t most of the seven airports the DHS OIG visited, ADASP screening stations were set up in front of worker access points, which allowed workers to identify that ADASP was being implemented and potentially choose another entry and avoid being screened." Supposedly that defect is in the process of being corrected.

It's hard to know whether to laugh at this obvious incompetence or to cry, in light of the seriousness of airport vulnerability to rogue employees (such as those at Orlando in 2007 who smuggled guns and drugs onto planes at night so they could be transported to Puerto Rico the next morning-but who could instead have been planting bombs).

Two things are clear to me, eight years after the ATSA legislation creating the TSA. First, the agency is devoting a disproportionate share of its resources to passenger and baggage screening, at the expense of lobby security, employee access control, and perimeter security. Second, divided responsibility for airport security (with TSA directly providing screening but a variety of other parties doing the other tasks) is far from optimal. Since TSA is the nation's aviation security policy-maker and regulator, it would be far better for it to do that job full-time, with each airport having undivided responsibility for implementing all airport security tasks (including screening), under TSA's regulatory oversight. But until Congress is willing to make that kind of major change, we're going to remain stuck with the dysfunctional status quo.

News Notes

New Report on Airport Cross-Subsidies

Hard on the heels of last month's USA Today investigation of Airport Improvement Program (AIP) grants comes a new report from the SubsidyScope project of the Pew Charitable Trusts. Overall, it confirms the large degree of cross-subsidy built into AIP, whose funding (entirely from the Aviation Trust Fund) comes 64% from airline passengers but whose grants to large and medium hubs (which serve the large majority of all passengers) account for only 33% of AIP spending. The report includes a searchable database on AIP expenditures from FY2005 through FY2008, including data on $/enplanement and each grant project's National Priority Rating. Go to: http://subsidyscope.com/projects/transportation/aip.

Going Beyond Current Airport Noise Programs

U.S. airports are required to mitigate noise that falls within a contour defined by the Day-Night Average Noise Level (DNL) 65, but some airports have gone beyond that in order to get expansion projects approved. The Airport Cooperative Research Program's Synthesis 16 provides an overview of U.S. airport noise practice in areas outside DNL 65. The researchers surveyed airport staff regarding such cases; in addition to presenting the survey results, the report provides two case studies. (http://onlinepubs.trb.org/onlinepubs/acrp/acrp_syn_016.pdf)

Atlanta Deploys Aerobahn System

Another airport that is equipped with the Sensis Corp. ASDE-X system for monitoring aircraft and vehicles on the ground to prevent runway incursions, has implemented the company's Aerobahn software that permits airlines and airport managers to collaborate on airport operational decisions, with common, real-time data on where all aircraft and ground vehicles are. Atlanta's Hartsfield-Jackson International Airport is the world's busiest airport. Aerobahn is also in use by JFK and Seattle-Tacoma airports, and by selected airlines at Newark Liberty, Houston Intercontinental, Detroit Metro, and Minneapolis/St. Paul. Overseas airport deployments include Orly and DeGaulle in Paris and Hong Kong International.

Shoe Removals Not Required at Checkpoints

It's true-that annoying requirement that you take off your shoes and put them on the belt does not apply . . . in Canada. (Actually, on my two trips to Europe earlier this year, I noticed people not removing their shoes in Germany and Sweden, either.) In fact, the recent Canadian Air Transport Security Authority (CATSA) bulletin on this subject, obtained last month by The Canadian Press under a freedom of information request, did not represent a change of policy. "It sounds new but it's not. It's always been the case since 2001," said Mathieu Larocque of CATSA. "We sent that reminder to make sure we're consistent." There is one exception, however. Air travelers heading for the United States must remove their shoes, to comply with U.S. security regulations.

Rio Airport to be Privatized Before Olympics

The main airport in Rio de Janeiro, the city which was just awarded the 2016 Summer Olympic Games, will be privatized before then, the government announced on October 6th. It turns out that the weakest factor in Rio's selection was the poor quality of Galeao International Airport, the country's largest. The Center for Asia Pacific Aviation reports that the government's privatization council said the terms of the privatization and a schedule are still being developed. The issue was raised last year by state governor Sergio Cabral, citing the need to correct the problems of "unsatisfactory infrastructure, poor airport services, and ineffective management."

Quotable Quote

"The imperative to move forward with some sort of 'trusted traveler' program will only increase as traffic begins to return to the aviation system, which most analysts agree will happen in the near future. Prior to the economic downturn, the situation at many airports was approaching unbearable, with growing lines at screening checkpoints frustrating passengers and creating a dangerous safety and security situation. While the temporary downturn in traffic has pushed many of these problems to the back burner, there is little doubt that they will soon return-making it all the more important that we are here today discussing a concept that holds tremendous promise in enhancing security while improving efficiency in the airport environment."

--Carter Morris, Senior Vice President, Transportation Security Policy, American Association of Airport Executives, testifying before the House Homeland Security Subcommittee on Transportation Security and Infrastructure Protection, Sept. 30, 2009.

Airport Policy and Security Newsletter #49

bob.poole@reason.org (Robert Poole) — Wed, 30 Sep 2009 00:00:00 EDT

In this issue:

Where AIP Grants Actually Go
Body Cavities and Suicide Bombers
New Orleans Revives Privatization Program
TSA's Belly-Cargo Screening Rule
Airports: Competition vs. Monopoly
News Notes
Quotable Quotes

Where Airport Grants Actually Go

USA Today's recent story by reporter Thomas Frank was described as "the first full accounting of the 28-year-old Airport Improvement Program." According to their analysis, over the years the program has put $15 billion into general aviation (GA) airports that have no scheduled passenger service. And those sums have grown dramatically during the past decade. From $470 million in 1999, the annual amount grew to a record $1.2 billion this year, far outpacing inflation. The story was featured on MSNBC and the Today show, stirring up a firestorm of protest in the GA community, which charged that it was based on a handful of anecdotes (ignoring the interactive national map, on which you can click on any of 3,155 airports and read its number of annual flight operations, number of AIP grants, and cumulative AIP funding: www.usatoday.com/travel/flights/2009-09-16-airport-map_N.htm).

I looked briefly into this issue last winter, finding that there is a large degree of cross-subsidy involved. AIP gets its funding from aviation excise taxes, the largest source of which is airline passengers, via the 7.5% tax on the ticket price plus the $3.60/segment tax. In 2006, for example, 97% of all airline passengers used large, medium, or small hub airports for their travel. But only 46.5% of AIP funding went to those three categories. Another 18.8% went to non-hub airports and a full 34.7% went to "other"-GA and reliever airports.

So it's quite legitimate for airline passengers and taxpayer groups to question the value proposition involved in the taxes they pay on airline tickets. To be sure, as Chip Barclay of the American Association of Airport Executives pointed out in response to the USA Today story, reliever airports in urban areas reduce the extent of congestion that might otherwise exist at hub airports. And certainly airports in small, rural areas can be important for businesses and tourism in those areas. But why should airline passengers-as opposed to local business groups, local taxpayers, and GA airport users-pay the bulk of those small airports' capital costs?

Congress loves AIP, and especially the cross-subsidy nature of it, which allows members to bring home the bacon to their districts, regardless of the benefit/cost ratio of the airport projects. So if data like that gathered by USA Today does not lead to AIP reforms, what hope is there for air travelers whose large and medium hubs have inadequate terminal space and out-of-date runways? Fortunately, Congress allows hub airports to charge per-passenger fees for specific improvement projects. Currently the ceiling on Passenger Facility Charges (PFCs) is $4.50 per enplanement, an amount that has been unchanged since 2000, while construction costs have escalated. The FAA reauthorization bill passed earlier this year by the House would increase that ceiling to $7.00, but there is thus far no comparable provision in the Senate, which is still drafting its bill.

Unlike AIP, which does some good despite being heavily politicized and earmarked, the PFC program is local self-help and a true user fee, in which those who pay are the ones who benefit. The PFC money they pay stays right there at the airport that levies it, and can be used only for specific, FAA-approved improvements to that airport. I'd love to see AIP reformed, but I'm not holding my breath. But the least Congress can do is to give large, medium, and small hub airports permission to raise more funds for much-needed improvements on their own.

Body Cavities and Suicide Bombers

Earlier this month, the Australian Associated Press reported that in a suicide bombing attempt to assassinate the Saudi Deputy Interior Minister Prince Mohammed bin Nayef, an al-Qaeda terrorist hid the bomb in his anal cavity and detonated himself while standing near the official. Fortunately for the latter, only the terrorist was killed in the explosion. But the use of body cavities to bring explosives aboard aircraft is an issue for airport security, worldwide.

A discussion in the Sept. 16^th issue of the STRATFOR Global Security & Intelligence Report ("Convergence: The Challenge of Aviation Security,") highlighted this episode as part of an ominous trend in airliner-related terrorism. First came hijackings for ransom, followed by hijackings leading to destroyed planes and sometimes passenger casualties. Then came bombs smuggled aboard in someone else's suitcase (Pan Am over Lockerbie). Only with the 9/11 attacks came suicide bombers taking over planes to use them as guided missiles. But since that tactic is increasingly unlikely to succeed, more recent plots have involved suicide bombers bringing the materials on board to assemble improvised explosive devices (IEDs) during flight. That was the scenario for which several people were just convicted in the U.K. liquid explosives plot; it was also the M.O. of the thwarted Bojinka plot, which intended to destroy multiple flights over the Pacific.

STRATFOR analyst Scott Stewart notes that body cavities are commonly used by people to smuggle drugs and weapons into prisons. And while exploding a small bomb that is still within the terrorist's body cavity seems unlikely to accomplish his intent of bringing down the plane, it does seem like a workable way to bring aboard components for an IED. So the obvious question becomes: what will the TSA and other aviation security organizations do about this threat?

One course would be to ignore the issue as impossibly gross and privacy-invading. But that would be entirely inconsistent with the global campaign to keep liquids (in any serious quantity) off planes, and all the other passenger and carry-on screening mandates. The other course would be to make greater use of body scanning machines-at the very least for everyone selected for "secondary screening." The STRATFOR report claims that "Even advanced body-imaging systems like the newer backscatter and millimeter wave systems being used to screen travelers for weapons are not capable of picking up explosives hidden inside a person's body." However, that's not what I've heard from a former TSA official who says such devices can be modified to do this job.

Sooner or later, this country is going to have to face up to the fact that putting every single air traveler through the third degree every time she takes an airline trip is a foolish policy. When we come to our senses, we will adopt a risk-based policy that does the best it can to separate the sheep from the goats, applying only nominal precautions to regular travelers who pass a voluntary background check and using intelligence data to identify high-risk travelers who need truly thorough screening. Meanwhile, welcome to body scanning, very possibly for everyone.

New Orleans Filing Revives Airport Privatization Program

When the impending privatization of Chicago's Midway Airport fell through earlier this year, some rushed to declare U.S. airport privatization dead. However, the application filed with the FAA by the New Orleans Aviation Board in August-and its approval in September-puts privatization back on the U.S. policy agenda.

The FAA's approval of the 320-page submission sets in motion what is expected to be a year-long process. The airport board expects to issue a request for qualifications (RFQ) before the end of the year, aiming to solicit bids and select a winner by next spring. If they can keep to that timetable, FAA approval could occur by late 2010.

There are several "ifs" involved in this process. The first is whether the New Orleans Aviation Board can duplicate Chicago's success in reaching an agreement with its air carriers on the terms and conditions of a new master lease agreement defining how rates and charges will be assessed. The largest carrier at New Orleans (MSY) is Southwest, the lead carrier that negotiated the agreement accepted by the other airlines at Midway. But Southwest's share at MSY is smaller than Midway, with a pretty good mix of other airlines (including American, Delta/Northwest, United, and USAirways). So the negotiations might be more complex.

Second, of course, is whether-by the time the final application needs to be approved by the FAA-the deal can be financed. The timing for this deal looks better than the unfortunate timing that killed the Midway deal; credit markets are gradually recovering, and should be in better shape than today by the first half of 2010.

But then there is also Congress to contend with. The much-delayed FAA reauthorization process-already two years late as of September 30^th-- still has a ways to go. The House has passed its version, and it includes anti-privatization provisions inserted by Rep. Jerry Costello (D, IL). They would increase the airline approval requirement from the current 65% to 75% and would also make privatized airports ineligible for AIP grants (though not exempting their passengers from the ticket tax which funds AIP). No comparable provisions are in the draft Senate bill, which has yet to reach the Senate floor. Ideally, the Senate bill would reduce the airline approval to 50%-plus-one and at least double the number of airports allowed to make use of the Pilot Program (from the current five slots).

TSA Belly-Cargo Rule Accepts Reality

In general, the approaches taken to cargo security in the United States differ in principle from those applying to airport passenger security. In the cargo arena-whether air, land, or seaborne-the general approach is risk-based. Instead of very costly and time-consuming mandates to examine 100% of all cargo, the general practice is to vet those in the supply chain handling cargo from origin to destination (e.g., "known shipper" programs), to use intelligence information to inspect specific cargo items, and to rely on random checks of other cargo as a backup. One presumes that the same legislative bodies that went overboard on passenger/baggage screening following 9/11 had the sense to realize the economic consequences of bringing commerce nearly to a halt, had they insisted on 100% physical inspection of all cargo, all the time.

But a crack in that sensible, risk-based approach to cargo was opened up by the 9/11 Commission several years ago, which recommended that 100% of all cargo carried aboard passenger planes (in the "belly," along with checked luggage) be physically screened. And Congress agreed to close this "loophole," not by relaxing the overkill checked-luggage mandate but by imposing the same mandate on belly cargo. The deadline they set was 50% of all such cargo by February 2009 and 100% by August 2010.

Fortunately, somewhat cooler heads have prevailed in the implementation of this congressional mandate. The TSA's "interim final rule," announced in mid-September, permits the widespread use of supply-chain partners to do the cargo screening. Freight forwarders, distribution centers, and other such firms can apply to become part of the Certified Cargo Screening Program (CCSP), under which they must comply with TSA background checks on employees, use TSA-approved screening technologies, and secure the supply chain from their screening location to the airline that will actually carry the cargo. By thus outsourcing the cargo screening function, the CCSP will avoid huge backlogs at airports, where space is at a premium.

An article in Airports International's July 2009 issue profiled the operations of CCSP participant Commercial Freight Services in Romulus, MI. That company is using two TSA-approved technologies, a desktop-size explosive trace detection system for small packages and a 35-foot long two-dimensional X-ray system for palletized cargo, including the industry-standard LD-3 containers. The trace detection system permits fairly rapid and relatively low-cost checking of parcels. And for cargo that arrives on pallets or containers, it's welcome news that TSA has approved technology that can inspect entire pallets or containers, instead of requiring them to be taken apart for individual-item inspection. (As of the time of the article, the huge Smith's Detection HISCAN unit was the only approved cargo screening system large enough for LD-3s.)

I doubt that a quantitative assessment of the cost-effectiveness of this 100% screening mandate would pass muster as a sound investment. But at least it has not served as an excuse for a huge expansion of TSA's own workforce. Instead, however, it is forcing a large unfunded mandate on segments of the goods-movement industry.

Airports: Competition vs. Monopoly

This past summer European low-cost carrier (LCC) Ryanair demanded that a number of UK airports reduce the fees they charge Ryanair to zero-or it would leave. While some complied, Manchester did not, and Ryanair is making good on its threat. In the September 2009 issue of Aviation Intelligence Reporter, Andrew Charlton cites this as an example of the growing market power of airlines vis-a-vis airports in the deregulated European airline market. Charlton argues that while a few airports that serve as major hubs for legacy airlines do have significant market power, most do not-and that airport policy should face up to this fact.

In a more academic form, that is the substance of the argument put forth in a discussion paper from the OECD/International Transport Forum's Joint Transport Research Centre last year. (www.internationaltransportform.org) Noted aviation economist David Starkie used the UK airport market to examine the degree of airport competition in that country-and found it to be generally robust, stimulated by the rapid growth of LCCs over the past decade. The paper includes useful tables indicating the extent of LCC operating bases at UK airports, the driving times between adjacent airports, and the general profitability of UK airports, despite (or perhaps because of) the ongoing competition. One key factor leading to greater competitiveness is the market for corporate control of UK airports, the large majority of which have been privatized, generally via outright sale.

Starkie concludes by noting that countries where airport privatization is pending, such as Spain and Portugal, are proceeding as if airports are inherently monopolies which therefore must undergo economic regulation. He laments that "the alternative approach, of restructuring ownership to provide a less concentrated, more competitive industry structure and then allowing competition to drive the industry forward, does not appear on the radar screen." Price controls could discourage investment and lead to airports skimping on quality of service, problems which have materialized at the BAA airports in London and Scotland, which were kept under common ownership (and hence regulation) when they were privatized. Far better, Starkie says, for government airports policy to foster competition wherever possible.

News Notes

Update re Registered Traveler

Last issue I wrote about the possibility that the database of members of the Clear and other Registered Traveler programs might be erased, which would preclude the sale of such data to any companies that want to offer a similar service (and which is likely the only tangible asset the bankrupt operator has, to satisfy creditors). I wrote that the TSA was proposing to delete the data but got several emails telling me that this was not the case, and that Aviation Daily had relied on a mistaken claim to that effect in a letter sent to TSA by two House members. I've done some further checking and now have copies of TSA's instructions to the AAAE clearinghouse that manages the database ordering them to delete the data. Fortunately, that action has not taken place-due to the timely intervention of Reps. Bennie Thompson (D, MS) and Peter King (R, NY).

CrewPass Expanding

The TSA has approved standards for fingerprint ID checking of airline crew members, enabling them to bypass the passenger checkpoints at airports. The CrewPass system (which was developed in 2007 by the Air Line Pilots Association) began as a TSA pilot program in 2008 at Baltimore, Columbus (GA), and Pittsburgh. ARINC developed the technology platform, and TSA and ARINC will be rolling the program out to airports nationwide.

New Newsletter and Consulting Firm

Aviation consultants David Bentley (U.K.) and Martti Raito (Canada) have launched Big Pond Aviation as a research, analysis and consulting firm based on both sides of the Atlantic. In addition to research and consulting, Big Pond has launched a quarterly newsletter. Details on both are available at: www.bigpondaviation.com

World's Best Airport Cell-Phone Lot?

Many U.S. airports, attempting to stop numerous cars illegally parked along airport entrance roads waiting for an arriving passenger to call, have set up cell-phone lots. Unfortunately, many are small, hard to get to, and fairly remote from the terminal. Tampa International has a 350-space lot, on airport property about a mile before you reach the terminal. Two giant message boards provide up-to-date information on arriving flights, and while you wait, there are rest rooms and free wi-fi service. The lot has been open since November 2005.

Who Writes these Headlines?

A few years ago in this newsletter I wrote about several companies that are helping general aviation airports balance their budgets by automating the process of billing pilots for landing fees. Last month, the weekly "Airports" section of Aviation Daily carried a feature on two of these companies, Passur Aerospace (Landing Fee Management System) and Era (RevenueVue). It was a good story, by veteran Aviation Week reporter Jim Ott. But who on earth penned the headline: "Automated Systems Spy on Operations and Fully Account for Landing Fees"? Meaning GA airports should just wink at people who use their services and refuse to pay? Like shoplifters?

Runway Incursion Systems More Widespread

The high-tech ASDE-X airport surface detection system has recently gone into operation at the 18^th and 19^th U.S. airports, with the addition of Newark Liberty in August and Boston Logan in September. The system uses a combination of surface movement radar, multilateration, and ADS-B to keep track of all aircraft and vehicles on the airport surface, in all kinds of weather. The FAA's goal is to get ASDE-X into operation at 35 airports by 2011. In addition, the agency has selected four companies to test lower-cost ground surveillance systems (LCGS) at four airports: Long Beach (Sensis Corp.), Manchester, NH (Thales), San Jose (SRA International), and Reno (Northrop Grumman).

Quotable Quotes

"I do think if more U.S. airports were privatized and you had a truly private company looking at the bottom line, then a lot of things that are happening in Europe would happen in American airports. There's no way you can say a city-driven airport has quite the same incentive as a truly privatized airport to drive profit to the bottom line."

--Frank Gray, Concession Planning International, in "International Aspirations: U.S. Airports Lag Far Behind in Concessions Revenue," by Carol Ward, Airport Revenue News, September 2009.

"In the end, it is impossible to keep all contraband off aircraft. Even in prison systems . . . corrections officials have not been able to prevent contraband from being smuggled into the system. . . .Obviously, efforts to improve technical methods to locate IED components must not be abandoned, but the existing vulnerabilities in airport screening systems demonstrate that emphasis also needs to be placed on finding the bomber and not merely finding the bomb. Finding the bomber will require placing a greater reliance on other methods such as checking names, conducting interviews, and assigning trained security officers to watch for abnormal behavior and suspicious demeanor. It also means that the often overlooked human elements of airport security, including situational awareness, observation, and intuition, need to be emphasized now more than ever."

--Scott Stewart, "Convergence: The Challenge of Aviation Security," STRATFOR Global Intelligence, Sept. 16, 2009 (www.stratfor.com)

"On the basis of the foregoing evidence, I would argue that a competitive framework is an achievable objective or a national airports policy. It is by no means evident that the industry is inherently a natural monopoly industry and thus requires regulation of prices or financial returns. On the contrary, the UK illustrates the ability of an airports industry to evolve a competitive structure whereby competition is an effective regulator of what the airport can charge the airline. Where there have been problems it is because of the failure to break up the state enterprise, the British Airports Authority, when it was privatized in the mid-1980s so that proximate airports in two UK regions, London and Scotland, continue in common ownership. The lesson to be drawn is clearly apparent."

--David Starkie, in "The Airport Industry in a Competitive Environment: A United Kingdom Perspective," Discussion Paper No. 2008-15, OECD/ITF Joint Transport Research Centre, July 2008.

Improving Transportation Security

bob.poole@reason.org (Robert Poole) — Thu, 17 Sep 2009 13:14:00 EDT

At National Journal's Transportation Expert's blog Lisa Caruso writes, "Last week the country marked the eighth anniversary of the Sept. 11 terrorist attacks, when terrorists hijacked commercial airliners and flew them into the World Trade Center, the Pentagon and, in the only thwarted attempt, a field in western Pennsylvania. The attacks exposed glaring vulnerabilities in our transportation security system and made addressing security threats to all modes of transportation a top priority for government and the private sector alike. Eight years later, where do we stand on that effort? Where has transportation security been enhanced and where do gaps still exist? What do we need to do next?"

Eight years ago, Congress enacted the Aviation & Transportation Security Act (ATSA) of 2001 in great haste, with very little prior study or research. The overwhelming political need was to reassure the voting public that something was being done to prevent a repeat of the horrible commandeering of airliners as weapons of mass destruction on 9/11. Consequently, despite having the words “transportation security” in its title, ATSA devoted the vast majority of its mandates and funding to commercial aviation security. That not only leaves gaping vulnerabilities in other transportation modes but also focuses far too much aviation security resources on keeping dangerous objects off airliners rather than making all of aviation less vulnerable.

A major problem inherent in dealing with security against terrorism via political means is the tendency to focus what are always scarce resources on highly visible efforts—what some have termed “security theater.” The alternative is to base security policy on serious risk analysis, putting resources where they achieve the greatest bang for the buck. That kind of analysis in aviation security suggests that spending $4 billion per year on screening every passenger and bag (rather than focusing resources more on higher-risk passengers) and stationing air marshals on airliners are not cost-effective uses of security dollars. If we spent less of these resources on security theater and more on preventing airfield perimeters from being breached and lobbies from being targeted by suicide bombers, we’d likely be better off. And by the same token, serious risk analysis might suggest spending relatively less on aviation security and relatively more on rail and cargo security.

Ultimately, countering domestic terror threats via a strategy of target-hardening is a losing proposition. A wealthy free society is inherently a target-rich environment—and we cannot afford to spend a sizeable fraction of our GDP hardening every possible target. The more we focus large sums on building a few hardened “Maginot Lines,” the more terrorists can shift to less-hardened or un-hardened targets—whether fuel storage facilities, long-distance power lines, or shopping malls. This suggests that a significant fraction of whatever we can afford to spend should be spent on intelligence work and counter-terrorist efforts rather than target-hardening.

My recent paper for the OECD/International Transport Forum, “Toward Risk-Based Aviation Security,” Discussion Paper No. 2008-23

Reason's Airport Security Research and Commentary

Airport Policy and Security Newsletter #48

bob.poole@reason.org (Robert Poole) — Mon, 31 Aug 2009 08:15:00 EDT

In this issue:

Can Registered Traveler Be Revived?
New Data on High-Speed Rail vs. Air Service
A New Pricing Proposal for LaGuardia
Airport Fire/Rescue Proposal Not Cost-Effective
Alternatives to Higher Small-Town Subsidies
News Notes

Can Registered Traveler Program Be Revived?

For reasons that have never been disclosed, the Transportation Security Administration refused to implement Registered Traveler as the kind of risk-based aviation security program that Congress intended. The cost-effectiveness of such an approach-focusing limited aviation security resources away from lower-risk travelers and toward higher-risk travelers-was documented early on in studies by RAND Corporation and Carnegie-Mellon University. More recently, operations researchers at Virginia Commonwealth University and the University of Illinois at Urbana-Champaign released a study offering further support. As published in the June 2009 issue of IIE Transactions, it reported their development of a risk-based security screening methodology. The research was supported by the National Science Foundation, the Air Force Office of Scientific Research, and the Department of Homeland Security. (www.scienceblog.com/cms/research-details-mathematical-model-effectively-screening-airline-passengers-21887.html)

But despite the strong support in Congress and academia for risk-based airport screening, the TSA seems determined to drive a stake through the heart of what remains of the RT program following the demise of leading provider Clear. TSA is now proposing to delete all the RT member data from the program's central database. This despite the fact that at least one other RT provider-FLO Corporation-is potentially in the market to acquire the data on Clear's 250,000 members and restart the program. And despite the fact that the sale of the membership data is the only hope for Clear's creditors to be paid some or all of what they are owed.

The TSA's plan is being challenged by two members of the House Homeland Security Committee, Rep. Bennie Thompson (D, MS) and Rep. Peter King (R, NY). In their August 20, 2009 letter to DHS Secretary Janet Napolitano, they wrote that "We believe the plan to sweep all of the information from this database is shortsighted and could potentially undermine restoration of the program." Thompson and King were among those reaffirming support for a risk-based RT program via language in the TSA Act of 2009, passed by the House several months ago. So far, the Senate has not yet acted on TSA reauthorization, and whether the eventual Senate bill will include a comparable RT provision is uncertain.

TSA's continuing hostility to a risk-based RT program is supremely ironic, given that its sister agency within the Department of Homeland Security continues to expand the risk-based international RT program. Earlier this month, Customs & Border Protection announced that its Global Entry program has been expanded to 13 more airports, bringing the total to 20. Under Global Entry, pre-screened low-risk air travelers get expedited re-entry into the United States from abroad, using kiosks to bypass the often-lengthy passport control lines.

When the Senate holds confirmation hearings for the nominee for TSA Administrator next month, they should grill him on ending the agency's hostility to a risk-based domestic Registered Traveler program. And the Senate should enact RT language comparable to what the House has already done requiring TSA to implement such a program, as Congress mandated in the original Aviation & Transportation Security Act of 2001.

New Data Undermine Case for Rail vs. Short-Haul Air Service

"For reasons of carbon reduction and wider environmental benefits, it is manifestly in the public interest that we systematically replace short-haul aviation with high-speed rail." That was the pronouncement August 5^th by UK Transport Secretary Andrew Adonis. The Reuters report that included this statement says the current Labor government plans to develop a national network of high-speed rail (HSR) lines, beginning with a new line from London to Birmingham.

As the U.S. government gears up to do likewise, we are seeing a growing number of reports that question whether these huge commitments of tax dollars actually make sense. A UK report by Booz Allen Hamilton, released in August (though completed in 2007) concluded that construction and operation of the planned north-south HSR network would emit more CO₂ than continued short-haul air travel over the next 60 years. HSR would only produce net carbon savings if it captured 62% of market share from airlines. But if train service is doubled from current levels (as some propose), HSR would need a market share of 73-85% to achieve net carbon savings.

The Swedish daily Dagens Nyheter published (August 21, 2009) a summary of a report on proposed HSR in Sweden, prepared by the Expert Group for Environmental Studies, for the Ministry of Finance. It is based on an analysis by consulting firm WSP for the National Railways Administration. Basically a social benefit/cost analysis, it concluded that the net social benefit (including environmental benefits) was only 80% of the project cost. The HSR system would eliminate only one percent of the transport sector's carbon emissions, at a very high cost per ton.

The Swedish study did not include the carbon emissions due to the construction of the HSR system, only that from its operations, unlike the UK study. The most comprehensive study on the total carbon footprint of different transport modes remains the one released in June by UC Berkeley analysts Mikhail Chester and Arpad Horvath. They found that leaving out carbon emissions due to the very energy-intensive construction of HSR lines and stations can make HSR appear far more carbon-friendly than it actually is. Including construction CO₂ in the assessment increases the carbon footprint of an airline trip by 31% (compared with only including emissions from operations). But for rail systems, the impact is vastly greater: the lifecycle carbon footprint of rail is increased by 155%.

Finally, you might also want to read an excellent overview of HSR's costs and benefits compared with short-haul air travel. "The Economic Effects of High Speed Rail Investment" by Gines de Rus of the University of Las Palmas in Spain is Discussion Paper No. 2008-16 from the Joint Transport Research Centre of the OECD and its International Transport Forum. One of its most interesting components is three tables comparing total costs (including environmental) and total revenues for the highway, rail, and air transport sectors of France, Germany, Netherlands, and Spain. As you might anticipate, the air transport systems are generally self-supporting, the roadway systems close to self-supporting (except Germany's), but the rail systems cost far more than they take in. Excluding from revenues explicit subsidies for certain "concessionary fares," the rail systems cover 55% of their costs in France, 41% in Germany, 39% in Netherlands, and 26% in Spain.

As de Rus concludes, "The case for HSR investment can rarely be justified on the benefits provided by the diversion of traffic from air transport."

A New Pricing Proposal for LaGuardia (and other Congested Airports)

In 2007, the Reason Foundation published a policy brief by Michael Levine, asking whether the politics surrounding runway congestion pricing could be overcome. (http://reason.org/news/show/congestion-pricing-at-new-york) In a recent online aviation discussion group, airline consultant Hubert Horan took up the Levine challenge. Rather than paraphrase what he wrote, I invited him to present that case here, as a guest article. I hope you find it as thought-provoking as I did.

We have a congestion/capacity problem, because for decades there has been political gridlock preventing even modest changes to aviation funding systems which, combined with obstacles to major infrastructure construction, has made it impossible to add major capacity in and around high traffic areas with congested airports.

Key to understanding the gridlock problem is recognizing that all of the key interest groups are either opposed to building more capacity where it is economically justified, or in paying their share of what that new capacity would cost. While each interest group has some legitimate concerns, most of their public pronouncements are just political posturing designed to ensure gridlock and protect the status quo. No incumbent airline wants the capacity that would support new competition, and they'll fight any new "user fees" that raise their costs. Many airports care much more about political prerogatives and blocking any restrictions on how fee revenues can be used than they do about supporting local economic growth or minimizing delays. No local politicians or members of Congress have the motivation to fight the opposition to new capacity based on noise and NIMBY considerations.

Any kind of longer term solution requires two things: a quasi-market mechanism that sets prices for the use of scarce runway capacity at the levels needed to eliminate "excess demand", and a "capacity-supplying" entity with incentives to maximize the social return on air capacity investments (i.e., expenditures justified by eliminating congestion/delay and creating economically productive new capacity).

What difficult but plausibly achievable intermediate steps should Congress/DOT take to move us in that direction? The near-term focus should be reducing bad incentives and political roadblocks. These proposals should be considered in the context of Mike Levine's question, "Is it possible to fashion remedies, perhaps "impure,"that if adopted will produce a result better than the current situation?"

1. Flat-Rate Landing Fees at Highly Congested Airports. Within today's residual-cost system, all airports at (or approaching) capacity would be required to structure landing fees so that every plane pays the same rate; hence, 757 rates would go down while regional jet (RJ) rates would go up. At LaGuardia (LGA), every existing slot holder would retain its current slots, but with structural incentives for airlines to maximize airport throughput given today's capacity. The assumption here is that airlines "overschedule" RJs since this is the cheapest way to protect slot "assets" and keep out low-cost carrier (LCC) competition. Airlines now doing this will face higher costs, but will be free to cover those costs with revenues from a bigger plane or sell the slot to someone else. This is a "market solution" in the sense of using incentives to let market participants reallocate resources, instead of letting DOT/FAA staff assign slots or make scheduling decisions. Slot values might change, but no slots get confiscated, and airlines never had a "right" to this week's slot values anyway. If throughput increases, the public has just achieved an increase in LGA capacity at a tiny fraction of the cost of building new runways.

This first step doesn't "solve" the capacity problem, but (if I'm right about the RJ issue) it would significantly reduce the external costs that the capacity problem imposes on consumers, airports and local economies. Legacy airlines argue that they fly all those RJs because their New York customers demand that type of high frequency/high fare service, and they are only motivated by the strong profitability of these flights; asset hoarding and LCC competitive threats have nothing to do with it. But the recent Delta/USAirways LGA/DCA slot swap suggests that past scheduling practices did not optimize short-term route profitability, and these carriers are strongly focused on longer-term slot asset values.

2. "Small City" Funding Mechanism for Congested Airports. Any future slot optimization system will have serious problems if there are big chunks of slots excluded from the system and handled "politically". But a rigid demand for no exceptions whatsoever isn't realistic given how the political process actually works. I don't think those "small city" claims would survive serious scrutiny, but they are still a political obstacle. So I propose a system where concerned cities/states could acquire and control some of the slots, based on the system they've used in France for many years. (The Orly slots used by most little planes are controlled by regional governments, not the operating airline). Congress would establish a funding pool linked to the EAS (Essential Air Service) program, and an EAS-like bidding process for cities/states that wanted federal subsidies to buy slots. The controlling city/state could contract with any airline to operate the flight at whatever rates the airlines would accept. These "public" slots could be transferred to other local governments but couldn't be sold back to the airlines. In a more perfect world I wouldn't want taxpayer money spent on these kinds of local airline routes, but I think this is a small price to pay for eliminating the "small cities" political barrier to more efficient use of LGA capacity, just as the original EAS program eliminated a political obstacle to deregulation.

3. Future Slot Sales on Blind Auction Basis. Slot sales would have to follow the "Blind Auction" approach outlined in Mike Levine's recent paper, whereby the selling airline wouldn't know the identity of the purchaser in advance, and with subsequent public disclosure of both the high and second-highest bid. This would provide greater transparency about the opportunity cost when airlines retain slots supporting unprofitable flights, and would reduce one barrier to LCC entry. I'd place a non-punitive excise tax on all slot sales (10%?) to recapture a bit of the scarcity rents, and to help fund the "small city" and other administrative programs.

4. Zero-tolerance Use or Lose. I would tighten rules that allow airlines to retain slots without actually using them, including specific prohibition on bankruptcy estates retaining slots that weren't being operated.

I think it makes more sense to let the dust settle from these initial steps before trying to tackle the more difficult slot pricing and capacity supply questions. If flat-rate fees at LGA have a notable impact, it makes it much easier to structure the next phase of capacity programs. It would also make it possible to reduce hourly slot caps without reducing airport throughput or airport revenues. If flat fees have little impact on scheduling or throughput at LGA, the next phase of capacity becomes much more expensive, but there will be clear evidence that cheaper approaches hadn't worked.-Hubert Horan.

New Airport Fire Requirements Not Cost-Effective

Early in my career, I worked for a consulting firm called Public Safety Systems, Inc. Among other things, we applied minicomputer systems to police and fire dispatching, and that is where I learned about the National Fire Protection Association (NFPA), as well as the power of the firefighters unions.

NFPA has standards for airport rescue and fire fighting (ARFF), and so does the International Civil Aviation Organization (ICAO), both of which are voluntary unless made mandatory by action of the relevant governments. Current FAA standards for ARFF are not as stringent as those of NFPA or ICAO-but that could be about to change. Section 311 of the House bill to reauthorize the FAA (HR 915) would require the FAA to adopt these more-stringent (and hence more-costly) standards. In response to concerns expressed by airport groups, the Transportation Research Board's Airport Cooperative Research Program (ACRP) commissioned a study. It's a web-only document, "How Proposed ARFF Standards Would Impact Airports," by Richard Golaszewski, Benedict Castellano, and Robert E. David. (http://onlinepubs.trb.org/acrp/acrp_webdoc_007.pdf)

The study compares current FAA ARFF standards under Part 139 of the Federal Air Regulations with what would be required under either ICAO or NFPA standards. It uses 11 years worth of data on accidents at 476 U.S. airports governed by Part 139 defined by FAA as Class I, II, and III. (The smallest airports, Class IV, were excluded because of very little passenger service.) The research task was estimate whether the additional fire-fighting staff and equipment under ICAO or NFPA would have made a significant difference to the outcome of the response to each incident. The standards impose more stringent requirements for ARFF response times, which affects the number and location of fire/rescue stations. They also prescribe minimum numbers of vehicles and rules for the number of firefighters to be on duty.

The study analyzed fatal air carrier accidents over the 1997-2007 period for airlines (both scheduled and non-scheduled) as well as air taxi and commuter operations. Eleven of the 23 fatal accidents for Part 121 airlines occurred far from airport property and so were not relevant for ARFF response. Nine others involved cases where fire/rescue response would not have made a difference (e.g., someone killed by walking into a propeller or by a collision between a plane and ground equipment). The other three-a runway overrun with fire, a crash into a maintenance hangar with fire, and a takeoff from a too-short runway with crash and fire-were analyzed and the conclusion in all three cases was that quicker response time would not have prevented any of the fatalities.

The summary of this safety analysis noted the relatively small number of fatal accidents during 11 years, and estimated that at best one life might have been saved due to faster response time.

What about the costs? Using a sample of airports from each size category, the researchers surveyed airport operators to determine the current and projected numbers of vehicles and firefighters under either NFPA or ICAO standards. Those numbers were then extrapolated to all the airports in each category. For the most stringent version-the NFPA two-minute response time standard-the total number of firefighters would more than double for the 476 airports included in the study. Smaller increases would be needed for the NFPA three-minute standard or the ICAO three-minute standard. Vehicle numbers would increase by similar amounts. The annualized operating and depreciation costs of the NFPA two-minute standard would be approximately $1 billion, the majority of which would be payroll costs for the additional firefighters. In general, the cost impacts would be greater the larger the airport, though the increased cost per enplaned passenger would be greater for the smaller airports (ranging from 28 cents/passenger at the largest to nearly $28/passenger at the Class III airports, for the NFPA two-minute standard). Even the least stringent NFPA standard would increase the Class III cost/passenger by nearly $14 (but only 3 cents/passenger at the largest Class I airports).

What I recall from my early exposure to NFPA is that, like most safety-oriented organizations, they want increased fire safety without much concern for cost or cost-effectiveness. And organizations like the International Association of Fire Fighters (the largest U.S. fire union) clearly want-and lobby for-standards that create more union jobs. Based on the ACRP's careful analysis, it's hard to see much of a case for what the House bill seeks to impose, especially on smaller airports.

Alternatives to Rural Air Subsidies

As the Senate Appropriations Committee discussed (and then approved) a 29% increase in funding to subsidize rural airline service, a flurry of newspaper articles appeared around the country. Many focused on Ely, NV as the poster child for the program's excesses. Joe Sharkey's syndicated New York Times column noted that Ely tops the list of subsidy per passenger, at $4,500. Only 414 people flew out of Ely in 2008, with an average load of 0.7 passengers per flight. Many of the other 150 towns and cities receiving subsidized air service cost taxpayers several hundred dollars per passenger.

The Essential Air Services (EAS) program began life in 1978 as a 10-year effort to ease the transition from the regulated-cartel approach that prevailed prior to passage of the Airline Deregulation Act of 1978. In the old days, airlines cross-subsidized service to rural cities with profits from their more-lucrative routes, but that no longer worked once every airline was free to fly anywhere. And since rural areas exist in most states, and every state has two Senators, EAS took on a life of its own, gradually expanding in size and becoming permanent.

Last month the Government Accountability Office released its latest study of EAS ("Options and Analytical Tools to Strengthen DOT's Approach to Supporting Communities' Access to the System"-GAO-09-753, available at www.gao.gov). In the course of looking into ways of reducing the EAS burden on taxpayers, GAO provides many insights into how the program operates. For one thing, about a third of its budget comes from foreigners! EAS receives about $50 million per year in overflight fees paid by aircraft owners (airlines and business jets) who use the U.S. air traffic control system while flying over U.S. territory. The balance comes from the Aviation Trust Fund (which means that you and I, as airline passengers, pay for most of EAS via our ticket taxes.)

GAO also points out that even as the number of small towns participating in EAS has grown over time, the number of participating airlines has shrunk from 34 in 1987 to just 10 as of 2009 (of which four serve 85% of the routes). Also, some of the requirements Congress has imposed-such as planes with at least 15 seats and at least twice-daily service-have contributed to very low load factors and high costs per passenger. The average load factor for EAS flights was 37% in 2008-compared with about 80% for regular air service.

Fundamentally, EAS appears to me to be a vain attempt to preserve an America that no longer exists. As GAO's report points out, many EAS communities have lost population over the last 30 years, meaning there is less demand for such service. The whole phenomenon of low-cost carriers (LCCs) has emerged during these three decades, leading many people in rural areas to drive 70 or 100 miles to an airport offering low-fare LCC service, rather than flying on a high-fare (despite subsidy) local EAS flight. And intercity bus service is enjoying a renaissance, offering new options to those "stranded" in rural America. So it's not at all clear why U.S. air travelers (and foreigners) should be taxed $175 million per year to provide a few small-plane flights to 100+ rural towns.

In an effort to reduce the tax burden, GAO reviews the pros and cons of a number of possible reform measures, including allowing smaller (e.g., nine-seat) planes and less-frequent service, consolidating EAS flights from nearby towns at a single airport, and limiting eligibility to the most remote towns. Those would help a bit, but I think we need to think further outside the box.

GAO does note that on-demand air taxi service and intercity bus service offer additional options that might cost less and provide better service than EAS in its current incarnation. And its report provides a fascinating appendix showing how the use of geographical information system (GIS) tools can identify small community transportation options.

But here are two additional ideas. Instead of having airline passengers on regular routes subsidizing small-town air service, why not take at face value the claims of small-town boosters that airline service makes them more viable places to live, work, and do business? In other words, let those communities put their money where their mouth is and come up with funding to assist one or more airlines with some level of air service. Some small and medium-size cities have been doing this for years, with varying degrees of success-for example, Wichita (KS), Myrtle Beach (SC), and Roswell (NM). These efforts generally involve local tax money and/or waivers of (city-owned) airport landing fees and other charges. Another way of approaching the problem is for the business community, typically the chamber of commerce, to come up with funding, as is done in France, where their chambers operate most of the smaller airports.

As the GAO report concludes, "Changes in the aviation industry and the nation's financial situation over the past 30 years may make this an opportune time to revisit [EAS] program objectives and evaluate design options for the program." I agree.

News Notes

Shoe Scanner on the Market

Although General Electric developed a prototype shoe scanner for use by defunct Registered Traveler provider Clear, it was never able to win TSA approval. Now comes IDO Security, with a $6,000 magnetic shoe scanner. Though not yet approved for U.S. use, the New York-based company has sold its MagShoe device to Israel's Ben-Gurion, Spain's Madrid Barajas International, Rome's Fiumicino, and Hong Kong International. CEO Michael Goldberg told Aviation Daily (Aug. 21, 2008) that he is "unable to discuss prospects for its use at airports in the United States," presumably because testing at TSA is under way.

Airport Privatization Recap

Each year my colleagues at the Reason Foundation produce an Annual Privatization Report, covering a wide range of fields in which governments have sold, leased, or outsourced the operation of traditionally government-run functions. In the 2009 edition, released last month, I wrote the chapter on air transportation, most of which is devoted to airport privatization. You will find the report at http://reason.org/apr2009.

Last Gatwick Bidder Withdraws

In mid-July, the third of three bidders for BAA's proposed sale of London Gatwick airport-Manchester Airports Group-withdrew from the bidding. The MAG team consisted of Manchester Airport, Canada's Borealis pension fund, and the Greater Manchester Pension Fund. BAA had hoped to raise £2 billion ($3.28 billion) from the sale, but due to both the current reduced levels of passenger traffic and credit market conditions, all three bids were far below that level. In withdrawing, MAG said it would not raise its £1.38 billion offer to BAA's new minimum requirement of £1.5 billion. BAA is still appealing a Competition Commission order that it sell Gatwick and two other airports within two years.

Risk-Based Security Paper Available

The policy paper I wrote last fall for the OECD's International Transport Forum has now been published. It compares the aviation security approaches taken by Canada, the European Union countries, and the United States and argues for a more risk-based approach. I presented it at a round-table discussion in Paris last December and again, slightly revised, at the ITF's annual Leipzig conference on transportation policy in May. The paper appears in the OECD/ITF report, Terrorism and International Transport: Towards Risk-Based Security Policy, Round Table #144. Go to: www.internationaltransportforum.org/Pub/new.html.

St. Petersburg, Russia Airport to Be Privatized

At the end of June, the city government of St. Petersburg announced the winning bidder for a 30-year concession to expand and operate Pulkovo Airport, the city's main commercial airport. Fraport, Horizon Air Investments, and Russian state bank VTB comprise the winning team. They will invest an estimated $1.5 billion to build a new terminal and make other improvements. The city will receive 11.5% of the airport's revenues. Whether this deal will increase the odds that Kosovo will attract bidders for its proposed privatization of Kosovo International Airport remains to be seen.

Guards Flunk GAO Covert Testing at Federal Buildings

There is no better test of the ability of a security system than covert testing, in which "red team" members simulate terrorist attempts to get through without being found out. The Federal Protective Service is responsible for protecting about 9,000 federal facilities (and, like TSA, is part of the Department of Homeland Security). Recently, the Government Accountability Office sent covert testers "carrying the components for an improvised explosive device" through security checkpoints at 10 federal facilities. At all 10, they got through without question, assembled the explosive device, and walked freely around the facility with the device in a briefcase. Read the report and weep. (GAO-09-859T, at www.gao.gov.)

Third Chicago Airport Gets New Funding

The proposed public-private project to develop a new south-suburban airport at Peotone, IL received a shot in the arm last month, when Gov. Pat Quinn signed a budget bill that includes $100 million to help the state DOT acquire the remaining 2,000 acres needed for the airport. The current plan calls for the state to acquire the land and manage the airside, while a private consortium develops and operates the landside (terminal, parking, etc.).

New Airport Screening Contracts in Roswell and Montana

Roswell (NM) International Air Center is getting a new airport screening contractor, under the TSA's Screening Partnership Program. The new provider is BOS Security of Athens, GA. BOS is replacing a previous contractor that provided airport screening there from 2007 to 2009. The new contract will run until 2014. And TSA has announced that Trinity Technology Group of Fairfax, VA has been selected to provide screening at seven small airports in Montana.

Airport Policy and Security Newsletter #47

bob.poole@reason.org (Robert Poole) — Sat, 11 Jul 2009 00:00:00 EDT

In this issue:

Mission Creep at TSA
Branson’s Radical Rethink of Airport Business Model
The Collapse of Clear
Follow-Up on Gatwick Airport Privatization
GA Airport Lease
News Notes
Quotable Quote

Mission Creep at the TSA

Two recent court cases have shined a spotlight on very troubling mission creep at the Transportation Security Administration, as pointed out in an excellent Wall Street Journal piece by Scott McCartney (July 2, 2009). Before discussing them, let me provide some context.

In general, law enforcement people cannot search you or your car or your house because you just might be doing something illegal. They either need a warrant or some kind of probable cause during an interaction with you. In responding to the attacks of Sept. 11, 2001, Congress decided that the threat of terrorism to aviation was sufficiently high to justify a narrow exception to that long-established principle. Because the threat was judged (correctly or not) sufficiently great, the newly created TSA was authorized to inspect the luggage of every single air traveler on commercial planes and to require every one of them to pass through a metal detector, as a condition of being allowed to reach the boarding area for flights. That’s a major departure from over 200 years of constitutional principle and legal practice.

But recently the TSA has begun moving beyond those limits. In one case, a passenger at Columbus, Ohio was selected for secondary screening because he’d purchased his ticket just before departure. He had a valid ID, had no weapons or other prohibited items in his luggage, and did not set off the metal detector. Despite the trace-detection swabbing of his carry-on turning up nothing, the officer opened his bag and found envelopes with cash and other envelopes with fake passports. On that basis, he was arrested. On appeal, U.S. District Court Judge Algenon Marbley ruled that TSA’s action violated the passenger’s Fourth Amendment right against unreasonable search and seizure. Prior cases, he said, clearly established that airport security searches are limited to detecting weapons and explosives.

The other case has not yet gone to trial. In this one, an officer of a political organization that evolved from the Ron Paul presidential campaign was detained by TSA at the St. Louis airport because he was carrying a lockbox with $4,700 in cash from the sale of T-shirts, bumper strips, and other political materials. Instead of answering their questions about the cash, he asked them the grounds on which they thought they could require him to answer such questions. He recorded the encounter on his iPhone, and on the basis of that recording, the ACLU has filed suit against Homeland Security Secretary Janet Napolitano. “Whether as a matter of formal policy or widespread practice, TSA now operates on the belief that airport security screening provides a convenient opportunity to fish for evidence of criminal conduct far removed from the agency’s mandate of ensuring flight safety,” says the ACLU.

It looks very much as if this is not a matter of rogue agents, but instead reflects genuine mission creep at TSA. The agency’s recent emphasis on “physical and behavioral screening” was defended by acting TSA Administrator Gale Rossides in congressional testimony just a few weeks ago. And the U.S. Attorney’s Office in Columbus has announced that it will appeal Judge Marbley’s decision.

Congress created the TSA to protect passengers and planes “against an act of criminal violence or aircraft piracy,” and it prohibited passengers from carrying a “weapon, explosive, or incendiary” onto a plane. It said nothing about cash or fake passports, nor did it give TSA the authority to act as police officers. It’s time for Congress to rein in its creation, before it does permanent damage to American liberty.

Branson, Missouri’s New Private Airport

In issue No. 36 (June 2008) I wrote about the successful financing and construction of a brand new airport to serve the country music tourist destination of Branson, MO. The airport opened on schedule this May, with two initial airline customers (AirTran and Sun Country). Because the airport was developed with private capital and no federal grants, it has far more commercial freedom than other airports, since it is not constrained by federal airport grant assurances. (It obviously must comply with all FAA and TSA safety and security requirements.)

So how different is Branson Airport LLC’s business model? An article in the June 2009 issue of Airport Business provides an in-depth look. As has already been fairly widely reported, in the absence of grant agreements, the airport can offer time-limited exclusives to the first airline that establishes service on a route to and from Branson. Instead of charging landing fees, it charges airlines a per-passenger fee that applies to all services—including ground handling. Hence, the airport company is has a financial incentive to expand the number of passengers, and to make sure they have a positive experience. So even though the airport has given an exclusive to Enterprise Rent-a-Car, it has an interest in making sure Enterprise does not charge monopoly rates.

Branson Airport LLC may be the first and only airport in America that paid for its own runway, control tower, instrument landing system, and everything else normally provided either by the FAA or funded largely with Airport Improvement Program grants. The tower is operated by Midwest ATC. The airport company has also created and operates its own fixed-base operator, Branson Jet Center FBO, offering fuel service, deicing, a GA terminal, and hangar space for private plane operators.

How did Branson Airport LLC put the funding together? The company raised a total of $155 million to build the airport. Of that sum, $115 million came from tax-exempt revenue bonds and $40 billion is equity put in by the founders. In order to issue tax-exempt bonds, the company needed a governmental issuer. So it made a deal with Taney County, giving it title to the airport’s land. The county created a transportation development district which issued the bonds and leased the property to the airport company for 50 years. (Had U.S. tax laws been more favorable to private infrastructure, the company would not have had to make this trade-off in order to get lower-cost financing.) One factor that makes the bonds more attractive to investors is an additional revenue stream besides what the company takes in from airlines, passenger retail sales, and its FBO: it has a 30-year deal with the city (which lives on tourism) under which the city pays the airport company $8.24 for every passenger it brings in. To the extent that the airport expands the tourism market, the city will benefit from increased sales tax revenue.

Creating a new airport from scratch is never easy, and places where the Branson model could be adapted may not be plentiful. But Branson Airport LLC is pioneering a dramatic new model of airport development.

Collapse of Clear: What Future for Registered Traveler?

Last month, shortly after the June issue of this newsletter reported passage of a House measure to turn the Registered Traveler program into the risk-based security program that Congress intended it to be, I was shocked to get an email announcing the shut-down of its business. (And this was only a few weeks after I’d renewed my membership for two years!). Evidently, the House action (not yet matched by the Senate) came too late to alter the economics of the business for Clear parent Verified Identity Pass. As the provider of RT services at 18 airports, it had large staffing expenses spread over not enough paying customers. Both new members and renewals were suffering, due to (1) the inability of Clear and other RT providers to offer hassle-free passage through screening checkpoints, and (2) the near-doubling of its membership fee level. For most potential customers, the value proposition just wasn’t there.

I’ve written at length over the last several years about how RT was intended to be a way of permitting the TSA to focus its screening resources on travelers who might actually be a threat to aviation security. As a recent report from the Congressional Research Service explained,
“Within weeks of the 9/11 attacks, the DOT’s Airport Security Rapid Response Team included among its recommendations the urgent need to establish a nationwide program for voluntarily submitting information for vetting passengers who would be issued ‘smart’ credentials, to expedite processing of the vast majority of travelers, thus allowing aviation security resources to be focused most effectively, an idea that became known as the ‘trusted traveler’ concept. The recommendation was reflected in statutory language and was included in the Aviation and Transportation Security Act.” (“Airport Passenger Screening: Background and Issues for Congress,” Congressional Research Service, April 23, 2009.)

But as we know, although the TSA initially performed a perfunctory background check on RT applicants, it never submitted their fingerprints to the FBI for the standard criminal history background check used to grant airport employees access to secure areas at airports. It eventually dropped even its perfunctory check, arbitrarily redefining Registered Traveler as an identification program, not a security program.

So what happens now? Most of the recent media coverage has been a lot of hand-waving about protecting the personal data on about 250,000 Clear members until it can be safely deleted from Lockheed Martin’s central data system. But deleting the data would be hugely premature. If the Senate concurs with the House language in requiring TSA to convert RT to its original purpose as a risk-based security program, that customer database will be a highly valuable asset. Aviation Daily reported on July 1st that Verified Identity Pass was working with secured creditors to assess whether any other companies might be interested in taking over the business. As long as the data are secure in Lockheed Martin’s hands, there is no need for haste. Let’s see if Congress can get RT back on track before deciding the fate of the data.

Reading the Tea Leaves on Gatwick Privatization

When I last reported on the pending sale of BAA’s London Gatwick Airport, BAA had received three bids, the amounts of which were not disclosed but which were rumored to be lower than the airport’s Regulated Asset Base of £1.6 billion ($2.4 billion). What follows comes from several published sources, but much of what they report is informed speculation and/or from unnamed sources.

The Financial Times on May 13th reported that the Lysander consortium, led by Citi Infrastructure Investors (and including Vancouver Airport Services, which had bid with Citi for Chicago Midway Airport) had been dropped, reportedly because its bid (generally estimated at £1.2 billion) was too low. A Citi spokesperson was quoted as objecting because their bid was the only one that was fully funded. A second bidder was later rejected, as well.

A May 25 report from TheDeal.com said that the word on the street was that Citi wanted a second shot, contending that BAA had been biased against it because of two previous deal failures—Midway and the Pennsylvania Turnpike. While the latter was purely political (the legislature failed to approve the needed enabling legislation to permit the Turnpike to be leased, and the Abertis/Citi consortium eventually withdrew their offer), the former was “an unfortunate combination of bad timing and miscalculation on Citi’s part,” said TheDeal.com. Citing unnamed sources, it claimed that the $2.5 billion deal structure for Midway included 40% equity (from Citi, John Hancock, and Vancouver Airport), $700-800 million in debt, and the balance from co-investors that included a Dutch pension fund, an Australian pension fund, and the Alaska State Pension Fund. It was the failure to secure these co-investors that led to the deal’s collapse, according to this report. The pension funds balked at the likely fall in value of the airport between summer 2008 when the bid was prepared and the early-2009 date for financial closing.

The most recent speculations are in a July 3rd article by David Bentley in Airport Business Daily . It cites a number of recent setbacks for the current Labor government—the failure on July 1st of the East Coast rail line, the postponement due to market conditions of a part-privatization of the Royal Mail, and the “survival mode” of the government after a recent drubbing in the elections for the European Parliament. The Royal Mail postponement, Bentley points out, strengthens BAA’s argument that now is not a good time to sell Gatwick, which BAA claims is worth less than half as much as two years ago. As it is, BAA has appealed to the Competition Commission, and the hearing on its appeal is set for October 19th. If it can prevail, on market-conditions grounds, then the remaining bid could be thrown out and a new auction held, perhaps in 2010.

So Citi Infrastructure Investors (which has yet to find a good investment for the estimated $4 billion that it has raised since 2007) and the others may get another shot at Gatwick.

FAA Approves Oceanside Airport Lease

On June 11th, 2009, the FAA approved a 50-year lease of the 50-acre general aviation airport in coastal Oceanside, California. The lessee is Airport Property Ventures, a startup company founded by several former airport managers. APV sees a great future in revamping money-losing GA airports, in effect turning sow’s ears into silk purses.

Under the deal APV reached with the City of Oceanside, the company will pay a flat monthly lease payment plus 40% of net income on all new development. The lease almost came unstuck, when the FAA viewed it as “privatization,” meaning the city would have to apply under the provisions of the Airport Privatization Pilot Program. But according to an article in North County Times, “The parties tweaked the language to get the agency’s consent” for treating it as a simple lease.

The principals of Airport Property Ventures are Jack Driscoll and Lydia Kennard, both former directors of Los Angeles World Airports, and Robert Clifford, a co-founder of American Airports Corporation, an operator of GA airports. In an interview in the January 2009 issue of Airport Business, Driscoll explained APV’s business approach. GA airports are typically a kind of stepchild to the city or county government that owns and runs them. “They are losing propositions for many of these cities.” But because they have received federal grants for many years, they have to remain in service as airports.

APV and its investors see potential in more-intensive development of often-underutilized GA airport land. “We want to maximize the aviation piece of it,” Driscoll said, and if there is excess property, work with the FAA to get permission to develop the rest commercially. And in those cases, rather than leasing that land to an outside developer, APV will develop it themselves.

While contract management of GA airports is not a new idea, it has not caught on as much as I’d thought it would when I first came across it 20+ years ago. I still think it has a lot of potential, and I’m glad to see another promising firm enter the field.

News Notes

Airport Privatization Update
Last December, in Issue No. 40, I wrote about World Airport Privatisation 2008 by David Bentley, the most comprehensive report on this subject in a long time. With the troubled credit market conditions of the last six months (including the collapse of the Midway Airport lease), Bentley decided it was time for an update. His new report, Airport Privatisation Update 2009 has just been released, offering 48 pages on a field that “is not yet down and out.” It’s available for US$100 from DJB Associates (www.djbassociates.webs.com).

MANPADS Defense in Israel
The Israeli government has decided to equip all commercial airliners based in that country with anti-missile defense systems of the directed infrared countermeasures (DIRCM) variety. The Ministry of Transport awarded a $76 million contract to Elbit Systems for a commercial version of the Elbit system used on military helicopters. Similar systems, made by Northrop Grumman and BAE Systems, have been tested on U.S. airliners. This might well be a prudent measure in Israel, considering the threats faced by that country. I don’t see it as setting a precedent for such equipage in this country.

Follow-up on Costs of New York Air Congestion
In the June issue I wrote about the excellent study from the Partnership for New York City, quantifying the cost of airport and airspace congestion and delays. In 2008 the cost to travelers, airlines, and shipping companies was estimated at $2.6 billion. Not included in the report was information on the size of the regional economy, to provide some context for this number. In response to my query, Merrill Pond of PFNYC tells me that the most recent figure they could find is $1.12 trillion, for 2006. So the congestion cost amounts to 0.2% of the regional economy--not as big an impact as you might expect, despite it being in the billions. The report also estimated the cost to users and to the regional economy from 2008 through 2025; that total is $95.6 billion, or an average of $5.6 billion per year or 0.43%. That’s hardly a trivial impact.

Low-Cost Carrier (LCC) Airport Near Paris?
AP reported (June 27, 2009) that low-cost carriers Ryanair and Wizz Air have expressed interest in plans to turn Airport Vatry, 100 miles east of Paris, into a hub serving LCCs. The airport, currently focused on air cargo, is near Reims, which is served by a TGV rail line offering 39-minute trips to Paris. Now dubbing itself “Paris Vatry,” the airport hopes to turn itself into a French analog of London Stansted, which primarily serves LCCs.

Aerobahn Serving Airlines at JFK
The Sensis Corp. Aerobahn system that I reported on last October after it was installed at JFK International in New York is now serving passenger and cargo airlines, as well as the airport operator, the Port Authority of New York and New Jersey. Aerobahn combines airline flight schedule information with real-time data from the airport’s ASDE-X ground surveillance system (which keeps track of aircraft location on the airfield). The aim is to reduce taxi times and surface delays, in addition to the usual ASDE-X function of increasing safety by preventing “runway incursions.”

Quotable Quotes

“[We have] decided to build everything, own everything, and operate like a business, without the restrictions and limitations that exist at other airports. I certainly believe there are things that can be learned from this project that can be applied to other airports. When this project proves itself, many municipalities will have to look at this model; and airlines will be interested in it as well. We strongly believe in the success of this model, and believe we are going to prove to the world that a private entity can run an airport, run it well, and be profitable at the same time.”
--Jeff Bourk, Executive Director, Branson Airport LLC, in Brad McAllister, “A Different Airport Model,” Airport Business, June 2009.

“Despite various efforts to improve checkpoint efficiency and reduce passenger wait times, checkpoint lines remain vulnerable terrorist targets for bombings, shootings, or the potential release of chemical or biological agents because they often consist of large congregations of individuals in the ‘non-sterile’ portion of the airport terminal, that is prior to screening for possible threat items. Inefficiencies at screening checkpoints that result in long screening queues and congestion in airport terminals introduce unique vulnerabilities.”
--Bart Elias, “Airport Passenger Screening: Background and Issues for Congress,” Congressional Research Service, April 23, 2009.

Registered Traveler Breakthrough Would Improve Airport Security

bob.poole@reason.org (Robert Poole) — Tue, 16 Jun 2009 15:45:00 EDT

The bill the House passed earlier this month to reauthorize the Transportation Security Administration contains big news for the Registered Traveler program. If the Senate follows suit, Registered Traveler could be turned into what it was originally intended to be—a risk-based program that enables TSA to re-focus its screening resources away from lower-risk travelers. That would mean a faster and less-hassle trip through airport security for potentially millions of Registered Traveler members like me.

As you may remember, in 2001 when Congress enacted the Aviation & Transportation Security Act creating the TSA, it explicitly called for the new agency to establish a “trusted traveler” program to expedite the screening of those passengers who pass a background check and enroll in such a program. As pointed out in the report on the current bill from the House Committee on Homeland Security, “Congress had intended for such trusted traveler programs to be utilized as a risk-management tool.”

When TSA created the Registered Traveler program, it initially used the information on people’s application forms to do a “security threat assessment” consisting of checking the applicant’s name against a wants & warrants database, an immigration database, and its own terrorism watch list. It never submitted the applicant’s fingerprints to the FBI, however, for a criminal history background check, which is done routinely for those airport employees who must be cleared via this check in order to have unescorted access to secure portions of the airport at which they work.

I pointed out this double standard. TSA actually stopped doing even the wants & warrants and immigration checks in 2007, arguing that Registered Traveler is merely an identity verification program, not a security program, and rescinding the charge it had levied on Registered Traveler service providers for that minimal background check. Consequently, Registered Traveler members must still go t hrough the identical checkpoint screening process as ordinary travelers—which saves TSA no resources that it could apply to beefed-up security elsewhere.

What the House measure does is require the TSA, within 120 days, to convert Registered Traveler into a risk-management tool by reinstating a threat-assessment program for Registered Traveler (RT) applicants, to be supplemented by private-sector background checks carried out by RT providers. But it also gives the TSA an out, if the Assistant Secretary of the Department of Homeland Security determines that the revamped RT program cannot be integrated into risk-based security screening operations. A separate provision of the bill requires TSA to develop alternative screening procedures for those RT members who hold Top Secret security clearances, regardless of the agency’s decision regarding general revamping of the program.

One knowledgeable source tells me that the Senate Commerce Committee has in the past been supportive of RT as a risk-based program, so there is a reasonable likelihood of favorable action in the Senate, now that the House bill including the RT provisions has passed the full House. The only change I would recommend the Senate make is to include submitting RT applicants’ fingerprints to the FBI for the same criminal history background check that applies to airport employees.

As of now, RT is in operation at 21 U.S. airports, and the largest operator—Verified Identity Pass--has 260,000 members in its Clear program. Those numbers could soar if RT members could bypass much of the rigamarole at the security checkpoint.

Reason Foundation's Airport Security Research

Airport Policy and Security Newsletter #46

bob.poole@reason.org (Robert Poole) — Mon, 15 Jun 2009 00:00:00 EDT

In this issue:

Registered Traveler Breakthrough
Airport Parking Privatization
New York Airport Congestion
TSA Backs Off on Private Pilots
New Frontier for U.S. Airports?
News Notes
Quotable Quote

Breakthrough for Registered Traveler Program

As you may remember, in 2001 when Congress enacted the Aviation & Transportation Security Act creating the TSA, it explicitly called for the new agency to establish a “trusted traveler” program to expedite the screening of those passengers who pass a background check and enroll in such a program. As pointed out in the report on the current bill from the House Committee on Homeland Security, “Congress had intended for such trusted traveler programs to be utilized as a risk-management tool.”

When TSA created the Registered Traveler (RT) program, it initially used the information on people’s application forms to do a “security threat assessment” consisting of checking the applicant’s name against a wants & warrants database, an immigration database, and its own terrorism watch list. It never submitted the applicant’s fingerprints to the FBI, however, for a criminal history background check, which is done routinely for those airport employees who must be cleared via this check in order to have unescorted access to secure portions of the airport at which they work. I pointed out this double standard in Issue No. 40 (Nov./Dec. 2008). TSA actually stopped doing even the wants & warrants and immigration checks in 2007, arguing that RT is merely an identity verification program, not a security program, and rescinding the charge it had levied on RT service providers for that minimal background check. Consequently, RT members must still go t hrough the identical checkpoint screening process as ordinary travelers—which saves TSA no resources that it could apply to beefed-up security elsewhere.

What the House measure does is require the TSA, within 120 days, to convert RT into a risk-management tool by reinstating a threat-assessment program for RT applicants, to be supplemented by private-sector background checks carried out by RT providers. But it also gives the TSA an out, if the Assistant Secretary of DHS determines that the revamped RT program cannot be integrated into risk-based security screening operations. A separate provision of the bill requires TSA to develop alternative screening procedures for those RT members who hold Top Secret security clearances, regardless of the agency’s decision regarding general revamping of the program.

One knowledgeable source tells me that the Senate Commerce Committee has in the past been supportive of RT as a risk-based program, so there is a reasonable likelihood of favorable action in the Senate, now that the House bill including the RT provisions has passed the full House. The only change I would recommend the Senate make is to include submitting RT applicants’ fingerprints to the FBI for the same criminal history background check that applies to airport employees.

As of now, RT is in operation at 21 U.S. airports, and the largest operator—Verified Identity Pass--has 260,000 members in its Clear program. Those numbers could soar if RT members could bypass much of the rigamarole at the security checkpoint.

Airport Parking: Next Up for Privatization?

Pittsburgh International Airport (PIT) has a problem. It put close to $500 million into building a new midfield terminal in the 1990s, mostly to serve US Airways, which maintained a large hub there. But after the 9/11 attacks, the airline downsized that hub, and dropped it as a hub altogether by 2004. That has reduced PIT’s enplanements from a peak of 20.7 million in 1997 to just 8.7 million in 2008. But with most of the bonded indebtedness still to pay off, PIT’s airline cost per enplanement last year was $15.80 (compared with only $5.98 in 2000). That makes it one of the most expensive U.S. airports for airlines to serve.

To get PIT out of this trap, Allegheny County executive Dan Onorato is proposing a long-term lease of the airport’s parking facilities to a private operator—13,200 spaces between garages and lots. His aim is to raise $500 million or more, all of it up-front (as in the City of Chicago’s recent leases of parking garages and parking meters). That would enable the Airport Authority to retire its entire $499 million worth of bonds. Debt service on those bonds is running $62 million per year, compared with about $22 million in annual parking revenue. Thus, the Airport Authority would for many years be saving a lot more in debt service expense than it would be losing in parking revenue.

Whether this would be a genuinely good deal depends on several factors. First is how much the lease would actually generate. An article in the Pittsburgh Post-Gazette quotes Merrill Stabile, president of parking operator Grant Oliver Corp., as saying that investment groups have recently paid 15 to 20 times earnings for parking facilities; he estimated parking at PIT could be worth $440 million. Two factors that would influence that value are (1) the length of the lease, and (2) what controls on parking rate increases would be included in the deal. From the airport’s standpoint, a lease term significantly longer than the term of its existing bonds might not be such a good deal.

Globally, there are well-established procedures for assessing the value of long-term privatization deals. Australia, Britain, and Canada all use a process called the Public Sector Comparator (PSC) to compare, quantitatively, the best-case public-sector model with potential private-sector deals. Chicago’s recent 75-year lease of its parking meter system for $1.2 billion was criticized in a report released this month by the city’s Inspector General Office for not having been analyzed via such a procedure. But the IGO report’s alternative calculation (which suggested that the city could have done better) failed to take into account the value of risk transfer to the private operator. In the case of parking facilities, the longer the lease term the greater the risk assumed by the lessee (e.g. that people will still be using cars and needing to park them in 50 or 75 years). And in the case of PIT, there is an obvious trade-off to be made in terms of making th e airport more attractive to airlines by getting its cost per enplanement way down versus giving up parking revenue for N years.

It’s also interesting to note that at the same time that Allegheny County is trying to lease its airport parking, the City of Los Angeles’s airport department is seeking to buy a 21-acre private parking operation directly east of LAX’s Terminal 1. The Park One property is for sale by AMB Properties Corp., and a Los Angeles Times story quotes one realtor as estimating the price could be in excess of $100 million. The facility has 2,720 spaces and is reportedly highly profitable.

New York Airport Congestion

How bad is congestion at the major New York-area airports? That’s the question the Partnership for New York City set out to answer, in a follow-up to the 2006-07 debates over congestion, delays, runway pricing, and slot auctions. It commissioned HDR Decision Economics to research the question, and the result was released in February 2009 as “Grounded: The High Cost of Air Traffic Congestion.” (www.pfnyc.org)

The report, which appears to be competently done, is something of an eye-opener. New York airport congestion has a number of costs, the principal ones of which are estimated as follows:

Lost time to air travelers was $1.7 billion in 2008, and over the period 2008-2025 will likely total more than $50 billion. Airline costs (wasted fuel and excessive crew time) were $834 million in 2008 and will total $25 billion between now and 2025. Freight shippers lost $136 million in 2008, and will lose a total of $4 billion by 2025. Productivity losses to the regional economy were estimated at $21.5 billion over the 2008-2025 period. And additional emissions generated by planes in long lines waiting to take off are estimated to cause harm estimated at $1.7 billion of this time period. That’s a huge price tag, in anybody’s book. So now that we know how bad the impact is, how should those affected deal with this costly congestion?

The introduction of the report created big expectations for me, saying the Partnership “wanted to determine whether investing in expansion of regional airport capacity and upgrading the air traffic control system to reduce flight delays would pay off for the region and the nation.” It follows this by saying that “The findings of this study clearly show that such investment is more than justified by the cost burdens resulting from inefficient and unpredictable passenger and air freight service due to congestion.”

I read on eagerly, hoping to find conclusions and recommendations calling for bold expansion plans—perhaps terminal expansion at LaGuardia to permit larger passenger volumes that would be consistent with “up-gauging” the average passenger capacity of planes using that airport or possibly the 2008 Reason Foundation proposal for adding a closely spaced parallel runway at JFK (www.reason.org/news/show/1002975.html).

Alas, what I got was a set of very modest incremental improvements: improve ground traffic management, speed up the use of RNAV (area navigation) departures, redesign the region’s airspace (already under way by the FAA), implement NextGen capabilities in the ATC system and on airliners, and (a direct result of the previous measure) reduce excess spacing between aircraft on approaches to the airports.

The report also includes a provocative statement that “All travelers, other things being equal, would prefer to arrive at their destinations more quickly, and almost all would be willing to pay something more to make that happen.” Indeed, the cost of passenger delays in the report was estimated using FAA air-traveler value of time figures. But instead of taking this point to its logical conclusion—runway congestion pricing—the report just drops it.

In fact, as George Donohue and Karla Hoffman found when they ran a strategic simulation game in cooperation with the FAA, airlines, and the Port Authority of New York and New Jersey, runway congestion pricing at LaGuardia would lead to significant up-gauging of aircraft there, making better use of its scarce and valuable runway capacity (www.reason.org/news/show/1002846.html). There is good reason to expect the same to be true of JFK and Newark. Runway pricing would not only reduce delays without reducing passenger throughput; it would also generate additional airport revenue that could help pay for terminal and runway expansions in the Port Authority’s airport system.

TSA Backs Off on Private Pilots

For months, the general aviation (GA) community has been complaining, with some justification, about a TSA security directive (SD-8F) that was going to impose burdensome requirements on private pilots using any of 400-odd commercial airports. In order to have unescorted access to the airfield at such airports, they would have to undergo a background check and obtain and wear an ID badge, just like airport employees. And if those badges were airport-specific (as many feared there would be) this would play havoc with the typically unscheduled nature of most GA activity.

In addition to objecting to the burdensome nature of the proposed requirements, the GA organizations also complained that TSA was issuing a new regulation simply by decree, rather than going through the typical federal procedure of publishing a notice of proposed rulemaking (NPRM) in the Federal Register and inviting comments from interested parties.

Recent weeks have brought two important changes, generally welcomed by the GA community. First, TSA issued a revised directive (SD-8G) easing the burden. As long as a private pilot stays near his/her plane or goes to and from the fixed base operator (FBO) office or the airport exit, no badge or background check is required. This will ease the burden on those flying into airports they are not based at. Those who are based at a commercial airport and lease space there (whether in a hangar or simply a tie-down) will need to get a badge for that airport, but this requirement can be waived if the airport provides an alternative acceptable to the TSA, such as an escort program.

The second change is included in the TSA reauthorization bill passed by the House June 4th. One provision of the bill tells TSA that security directives (like SD-8) should be used only in response to emergencies or immediate threats. New regulations on aircraft operators should be introduced using the normal federal rule-making process.

Controlling access to the airfield has generally been one of the weakest links in TSA’s aviation security program. So while I’m glad that they are taking access control more seriously, I think they’ve made some sensible trade-offs in revising these new regulations.

Houston Pursues A New Frontier for U.S. Airport Operators

Few people were surprised when YVR Airport Services Ltd. turned up as part of the consortium that won the bidding for Chicago’s Midway Airport—or that it was part of a consortium bidding for London Gatwick Airport. Vancouver Airport Authority’s airport consulting and privatization division has become fairly well-known in aviation circles.

Much less visible, until recently, has been a similar U.S. company. Houston Airport System Development Corporation (HASDC) is a nonprofit corporation controlled by the city of Houston’s Houston Airport System, operator of the two commercial airports and one GA airport in Houston. It was set up in 1998 in response to a request from Bechtel for advice on a possible airport privatization deal in Mexico. HAS director Rick Vacar was made its managing director, with two outside directors, one appointed by the Port of Houston and the other by the Greater Houston Partnership. Over the years HASDC has done considerable airport consulting and been involved in consortia managing airports under contract, mostly in Latin America.

Last year, with overseas airport privatization opportunities proliferating, HASDC formed a joint venture with Airport Development Corporation, a for-profit company based in Toronto. HASDC has 51% and ADC has 49% of the new entity, ADC&HAS, Inc. The joint venture evolved out of the two having teamed several years earlier to win a long-term (35-year) concession in Quito, Ecuador. Under that deal, the company has been operating the existing Quito airport since 2002, while it builds the $600 million replacement airport at a lower elevation; the new airport is scheduled to open in 2010. The financing of the project has been provided primarily via loans from the Overseas Private Investment Corporation, though ADC put in $80 million in equity. HASDC gets a 25% stake in the concession as “carried interest,” representing its sweat equity in the deal. ADC&HAS has also joined forces with Canadian pension fund OMERS, which has about a decade of experience i n global infrastructure investing. OMERS has committed to provide up to $150 million in equity as the venture’s funding partner for various airport privatization projects.

In a long article in the January 2009 issue of Airport Business, Vacar discussed how the opportunity for Houston airport employees to be detailed to work on HASDC projects enriches their career experience. “People do it for the experience. They get an opportunity to get involved and show their stuff. It makes a big difference in what you get out of people. We’ve had some wonderful successes here.” HASDC president Gary Lantner added, “In the U.S., Denver is the last new airport built; before that, DFW in 1973. Quito is maybe the first time in this generation of airport people for them to be actually involved in a complete new start-up airport. If you’re an airport junkie, Quito is a heck of an opportunity.” (HASDC reimburses the city at 1.8 times an employee’s salary for time spent on HASDC business.)

Rick Vacar stepped down, unexpectedly, as CEO of Houston Airport System on May 15th. Airportbusiness.com reported (May 19th) City Hall sources as saying there had been friction between Mayor Bill White and Vacar. Whatever the reasons, I doubt we’ve seen the last of Vacar, and we can expect great things from ADC&HAS, Inc.

News Notes

Mechanics Who Can’t Read English
That was the headline on a story on the website of WFAA, Channel 8 in Dallas/Ft. Worth. Byron Harris reported on his investigation of some of the 236 FAA-certified aircraft repair stations in Texas. The May 16, 2009 story claims that “hundreds of the mechanics working in those shops do not speak English and are unable to read repair manuals.” Supervisors, who must be FAA-licensed Airframe and Powerplant (A&P) mechanics, must sign off on the work of non-licensed mechanics. English is the internationally accepted language of aviation, and the story raises serious questions about FAA oversight of repair stations. It also quoted insiders as saying inspectors warn repair stations in advance about inspections, and also cited mechanics being given tests in Spanish, at a facility that the FAA eventually shut down.

Correction re Amtrak Subsidy
In last month’s lead story on potential replacement of short-haul airline service with high-speed rail, I misquoted the net federal subsidy figure for Amtrak service. The correct number, from the 2004 US DOT study, is $186 per thousand passenger-miles. The DOT’s Bureau of Transportation Statistics has not updated its federal subsidy numbers, but a new report from the Heritage Foundation has re-done the analysis, using consistent data for all passenger transport modes covering years from 1990 through 2006. The latest available figure for Amtrak (inter-city passenger rail) is $238 per thousand passenger-miles. That compares with $4.23 for commercial airline service. (www.heritage.org/Research/SmartGrowth/bg2283.cfm)

Airport Privatization in Sweden
As in some other countries, until recently Swedish air traffic control and airports were run by a single government agency, LFV. Now that Sweden has commercialized LFV as the country’s air navigation service provider, it is selling off its airports. First to go was Jonkoping Airport, purchased by the city of Jonkoping. The five other regional airports—Angelholm Helsingborg, Karlstad, Omskoldsvik, Skelleftea, and Sundsvall Haomsand—are to be sold by the end of 2009. The six regional airports combined handled 1.3 million passengers in 2008.

House Bill Would Ban Body Scanning
The TSA reauthorization bill passed by the House in early June would restrict the usage of whole-body image equipment as a replacement for walk-though metal detectors. Responding to privacy complaints, the House voted 310-118 to require the TSA to use the devices only for secondary screening. Therefore, passengers with things like ceramic knives and plastic explosives under their clothing would not be detected when passing through screening checkpoints, unless they had been singled out for secondary screening.

Follow-up on MANPADS
An industry official (who requested that I not use his name) responded to my May issue article on MANPADS making several points. One was that many security officials acknowledge that these shoulder-launched missiles are so small that they cannot realistically be prevented from being smuggled into the country. And if one of those missiles is ever used to attack a U.S. airliner, the political response could be chaotic. He suggested that it would be prudent for the government, therefore, to at least equip several hundred airline aircraft that are enrolled in the Civil Reserve Air Fleet (CRAF) program and are used to ferry troops and cargo to overseas locations. That probably is a prudent measure, and at a cost of about $1 million per plane, would be a trivial addition to the defense budget.

Quotable Quote

“When we began to think of passengers as our customers too, it had a radical impact on our airports in terms of terminal design, investment strategies, our approach to our business partners, colleague engagement, and innovation. It is undoubtedly the key to our future success and that of our partners.”
--Geoff Muirhead, CEO of Manchester Airports Group, quoted in “Terminal Illness,” by Victoria Moores, Airline Business, June 2009.

Airport Policy and Security Newsletter #45

bob.poole@reason.org (Robert Poole) — Thu, 21 May 2009 14:10:00 EDT

In this issue:

Short-haul flights vs. rail
Airport privatization after Midway
MANPADS defenses—not needed?
Airport landing slots in Europe
The Maginot Line of airport screening
Feedback on FAMs vs. FFDOs
News Notes
Quotable Quote

Replacing Short-Haul Air Travel?

"Let's end air travel of less than 500 miles," proclaimed Pennsylvania Gov. Ed Rendell, speaking at the America 2050 conference in New York City on April 17th. That was just one day after President Barack Obama announced his vision for high speed rail. "Imagine whisking through towns at speeds over 100 miles an hour, walking only a few steps to public transportation, and ending up just blocks from your destination." Such a system, he said would reduce travel times, increase mobility, reduce congestion, boost productivity, reduce destructive emissions, and create jobs. Whew!

Because I research and write about surface transportation policy in addition to aviation policy, I know quite a bit about inter-city rail, high-speed and otherwise. For this brief article, let me confine my comments to two questions. First, could inter-city passenger rail do what Gov. Rendell and President Obama say it could? Second, should we make the attempt?

Let's address the second question first, as a question of broad public policy. Once you dig down into the details of what transportation infrastructure costs and who pays for what, you find a fundamental difference between the currently dominant modes of inter-city travel—driving and air travel—and passenger rail. The infrastructure of the former are paid for almost entirely by their users, via federal and state gasoline taxes (and some other motor vehicle taxes) in the case of highways, and via airline ticket taxes and passenger facility fees in the case of air travel (airports and the air traffic control system). By contrast, for passenger rail, the entire cost of creating the infrastructure is paid for by non-users (general taxpayers), and the rail passengers pay only a portion of the operating costs via their ticket prices.

Therefore, proponents of replacing short-haul airline service with inter-city rail are calling upon general taxpayers to create and continually subsidize a transportation mode that is aimed at taking business away from unsubsidized airlines (and motorists driving their own cars on highways that their user taxes are paying for). As one example of the difference in general taxpayer support for these inter-city passenger modes, consider the following statistics. These come from a report produced by the U.S. DOT's Bureau of Transportation Statistics.

"Federal Subsidies for Passenger Transportation" computed net federal subsidy as total federal outlays for a mode minus federal receipts from transportation taxes and user fees paid by users of that mode. For Amtrak, the subsidy turned out to be $186 per thousand passenger miles. For highways that are part of the federal highways system, the comparable figure was minus $2 (i.e., federal highway user tax receipts totaled slightly more than total federal highway outlays). For airlines, the net subsidy was $6 per thousand passenger miles. So the federal subsidy per passenger mile for inter-city rail was found to be 31 times as much as the subsidy per airline passenger mile.

I think that puts a very heavy burden of proof on passenger rail proponents to justify massively subsidizing a mode of transportation designed to take business away from essentially self-supporting, tax-paying airlines. Now let's briefly address the question of whether new inter-city rail of the kind the new Administration plans to subsidize can do the kinds of things Rendell and Obama implied it would do.

A viable alternative to air travel for 300-500-mile trips? Certainly, in the dense Northeast Corridor for trips that are mostly downtown to downtown. But the geographic reality of most of urban America today is that most jobs are not in traditional central business districts; over the past 40 years jobs have followed residences to the suburbs, in Edge Cities and Edgeless Cities. But rail lines serve stations in central business districts, which is not where most people need to go. That also calls into question the potential travel time savings.

As for emissions, most of the actual rail lines to be aided by the new federal program use (and will continue to use) diesel locomotives, not exactly a low-emission power source. The only current plan for truly high-speed rail—California's—would be electric powered. Yet contrary to early claims of its proponents about huge reductions in greenhouse gases, the actual impact of the proposed system (if it achieves the unbelievably high traffic projections put forth by its proponents) would be to provide just 1.5% of the total GHG reductions in California's ambitious GHG reduction plan (and at a cost/ton of between $2,000 and $10,000, versus the generally accepted ceiling of $50/ton).

I understand that some directors of congested major airports would be happy to see short-haul and commuter flights replaced by more lucrative long-haul flights. But that's unlikely to happen. And it's also worth remembering that for airports that operate as connecting hubs, many short-haul flights feed long-haul flights. So unless the new-rail plans bring high-speed rail directly to airports (which is not in the plans, leaving travelers to take expensive cab rides), that vital feeder function would be lost, to the extent that rail did substitute for air service in 300-500-mile markets.

If you're interested in reading more about the proposed California rail system, take a look at the detailed "due diligence" report Reason Foundation had two rail experts prepare last year. Go to www.reason.org/news/show/1003044.html.

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After Midway Deal Collapse, Whither Airport Privatization?

In the month since the $2.5 billion lease of Midway Airport collapsed, due to the winning bidder's inability to put together the financing package, I've been asked repeatedly what this may portend for the future of U.S. airport privatization. To answer this question, it's important to try to understand what happened between the time the MIDCo team submitted its winning bid last September and mid-April when the plug got pulled. What happened was the credit market collapse.

At the time of MIDCo's bid, I was hardly alone in thinking that $2.5 billion was a very aggressive valuation for an airport with no room to add capacity, albeit classed by the FAA as a "large hub" in a still-growing metro area. In 2007-08, leases of existing transportation infrastructure assets were being financed largely by debt (e.g., the Chicago Skyway and Indiana Toll Road). Deal structures of 15% equity and 85% debt were not uncommon. But when credit suddenly got hard to get, banks and revenue bond providers started requiring a lot more equity. (This is akin to home lenders requiring much larger down payments.) Example: late last year a Spanish company acquired several existing toll roads in Chile, and needed 41% equity to close the deal. MIDCo's dominant member was Citi Infrastructure Investors, an infrastructure equity fund. If it had based its calculations last summer on 15% or 20% equity, with the rest coming from various lenders, it may have b een reluctant to put in 50% or more, if that's what lenders were demanding by this spring.

My suspicions were confirmed when the same MIDCo players (Citi, John Hancock Life Insurance, and Vancouver Airport Services), operating as Lysander Gatwick Investment Group, put in a $1.8 billion bid for London Gatwick Airport this spring. That would have been a better use of a good-sized chunk of the equity in Citi's infrastructure fund, given Gatwick's potential for a second runway and new service thanks to the break-up of BAA's near-monopoly on air service to Southeast England. But alas for the Lysander Group, their bid was rejected earlier this month.

Getting back to what happens post-Midway, there are several implications. First, the other governments contemplating leasing airports under the federal Pilot Program (in Austin, Hartford, Jacksonville, Kansas City, Long Beach, Milwaukee, Minneapolis, New Orleans, Ontario) will now have to consider more realistic valuations as they weigh the trade-offs. Second, unless Chicago comes back to the FAA with a new proposal, it will vacate the one slot in the Pilot Program reserved for large hub airports, potentially opening the door for other large cities. And as long as the fiscal crunch for state and local governments continues, we can expect elected officials to continue eyeing asset sales and leases as potential balance-sheet strengtheners.

I have just completed writing a global wrap-up on airport privatization, for Reason Foundation's annual privatization report for 2009. It is due out by mid-July. When you read that, you will see that the global shift toward commercializing and privatizing airports that began in 1987 continues unabated, in Europe, Asia, and Latin America. That means there are even more qualified global airport companies and no shortage of would-be airport investors, despite tightened credit markets. I can't imagine the United States remaining aloof from this megatrend much longer.

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Defense Against MANPADs Not Needed?

Regular readers of this newsletter know that I've been a skeptic, from the outset, of there being a serious threat to U.S. passenger aircraft from Man-Portable Air Defense Systems (MANPADS)—those nifty shoulder-launched anti-aircraft missiles like the Stingers the CIA gave to the mujahedin fighting to drive the Soviets out of Afghanistan in the 1980s. There has still been no release of the results of DHS's 15-month test of Northrop Grumman's Guardian system on 11 FedEx MD-11s in 2007-08. And congressional advocates of multi-billion-dollar programs to equip every U.S. airliner with something like Guardian have been pretty quiet, of late.

So perhaps I shouldn't have been so surprised by a little item in Aviation Daily last week. Buried in a story headlined "FedEx CEO Says Defense Dept. Should Consider Smaller Cargo Jets" was this very provocative comment. USAF Gen. Duncan McNabb, head of the U.S. Transportation Command, was reported by correspondent John Doyle as telling a House Aviation Subcommittee hearing on CRAF (the Civil Reserve Air Fleet) that "commercial aircraft carrying DOD personnel and cargo into danger zones like Iraq do not need onboard defenses against surface to air missiles." He told them that threat assessment and various other DOD tactics and techniques make it unnecessary for such planes to be equipped with anti-missile defenses. And besides, if they were to be so equipped, that would require a lot of very costly training. There is no significant missile threat to CRAF aircraft, he told the Congress members.

At this point, my only question is this: How do we get General McNabb to testify before the committees dealing not just with aviation but with homeland security? If airborne missile defenses are not justified for airliners going into war zones, how on earth could they be cost-effective here in the United States?

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More Squabbles Over Airport Landing Slots

Last month I reported that legacy airlines in Europe had prevailed on the European Commission to suspend for two seasons the "use it or lose it" rule governing airport slots at major EU airports. Under that rule, airlines must surrender slots if they aren't using them at least 80% of the time. Airports and low-cost carriers protested, but the EC prevailed.

But it turns out there has been a significant backlash. Andrew Charlton of Aviation Advocacy reports in his May newsletter that the European Parliament, which was not consulted about the suspension, has struck back. While consenting to the 2009 suspension, the Parliament has demanded that the slot regulation system come up for a full review, and that future changes be decided jointly by the Parliament and the Commission. There will now be a full study of the issue, with a proposal for a revamped system due by the end of the year. Representatives of airports and low-cost carriers are cautiously optimistic, given that the larger airports have long waiting lists for slots, mostly from LCCs that are eager to expand service. The airports need the revenue, airlines and passengers want more low-fare services, so why on earth is the Commission standing in the way of willing buyers and sellers?

That question has relevance for the congested-airports debate here in the United States. In arguing against any kind of pricing approach for the New York airports, the legacy carriers (represented by the International Air Transport Association—IATA) repeatedly proferred as an alternative to slot auctions the IATA Worldwide Scheduling Guidelines (WSG) for slot allocation. Under this system, widely used in Europe, slots are held in perpetuity by those who got there first (meaning mostly legacy carriers), but any new slots that become available (e.g., if a carrier goes out of business or cuts way back at a particular airport) can be traded or sold on a secondary market. It's a great system for keeping the Ins in and the Outs out. But rest assured, IATA tells us, the "use-it-or-lose-it" rule will prevent slot hoarding.

Uh-huh. We are now getting an object lesson in how that works. When push comes to shove in WSG Europe, out the window goes "use-it-or-lose it." So when Transportation Secretary Ray LaHood announced last week, as expected, that he was terminating the Bush administration's plan to auction off a small portion of the slots at the congested New York-area airports, we can at least breathe a sigh of relief that IATA did not succeed in foisting the Worldwide Scheduling Guidelines on us.

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The Maginot Line of Airport Screening

In a paper I will be presenting later this month at the OECD International Transport Forum's "Transport for a Global Economy" conference in Leipzig, I discuss the creation of static, inflexible "Maginot Line"-like defenses against aviation terrorism, such as large, centralized government airport screening organizations. In comparing the U.S. approach with that of Canada and Europe, I discovered that all of Canada's screening services (and much of Europe's) are provided by private security firms. Unlike the minimum-wage rent-a-cops that staffed screening checkpoints at U.S. airports prior to 9/11, the screening contractors in Europe and Canada must meet tough certification standards and ongoing performance standards. Such a system provides considerable flexibility, as threat levels change or, more commonly, as airline activity increases or decreases at particular airports. RAND Corporation and others have cautioned against building Maginot Line fortresse s at particular target sites—but that is what we've done at U.S. airports.

Some of us urged the performance-contracting approach in autumn 2001, as Congress rushed to enact the Aviation & Transportation Security Act (ATSA), which mandated the "federalization" of airport security. For our troubles, we got a five-airport pilot program to test the idea, and the promise that several years after TSA screening was in place at all 400+ airports, those airports would be free to ask TSA for permission to kick out its screeners and replace them with TSA-certified contractors. Oh, and by the way, TSA is also the aviation security regulator of every airport.

Not surprisingly, not a single airport with TSA screeners has asked to opt out (though likewise, none of the five pilot program airports has asked to kick out its private screeners, either). Instead, the modest growth of the TSA's Screening Partnership Program (SPP) has been at airports reaching the threshold of scheduled airline service, and thereby requiring screening. Thus, as of the first of this month, besides the five original pilot program airports (San Francisco, Kansas City, Rochester, Tupelo, and Jackson Hole), the airports that have been added to SPP are Sioux Falls (SD), Key West (FL), Roswell (NM), Sonoma City (CA), and the 34th Street Heliport (NY). The TSA is in the process of selecting a contractor to serve seven small Montana EAS (Essential Air Services) airports, and Butte (MT) has submitted an application to join the SPP.

One other impending development is likely to further strengthen the Maginot Line nature of TSA-provided airport screening. The Obama administration is widely expected to permit TSA screeners to unionize, as Obama promised on the campaign trail. The legislation (ATSA) creating the TSA left this question to be decided by the agency's Administrator, and as of this writing, no one has been nominated for that position. Unionization will not be the end of the world, but it will make it even harder to downsize airport screening workforces when and where it makes sense to do that.

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Feedback on FAMs vs. FFDOs

My article last month on the very poor cost-effectiveness of Federal Air Marshals (FAMs) compared with armed pilots (under the TSA's Federal Flight Deck Officers [FFDO] program) brought several responses. The most detailed was from Billie Vincent, former director of FAA's Office of Civil Aviation Security. In the 1980s, he tells me, the FAM program was part of his organization, and he beefed it up to several hundred members in response to a Presidential order following the 1985 TWA Flight 847 hijacking out of Athens. But now that FFDO has been implemented, he's become a big fan.

"Since 9/11," he writes, "I have published several articles on the FAM versus the FFDO program and advocated a significant addition to the overall structure in response to an FAA NPRM [Notice of Proposed Rule Making]. My proposals were to go almost exclusively with the FFDO program," as well as adding ballistics protection inside the cockpit and covert CCTV cameras in the cabin, able to be monitored from the cockpit and the ground. He also tells me that to put two FAMs on all US commercial aircraft would require in the neighborhood of 56,000 FAMs at a cost of $5.6 billion per year, which "makes absolutely no sense"—and I heartily agree.

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News Notes

Registered Traveler's Growth Continues. Despite offering only head-of-the-line privileges and an increased annual fee of $199, Verified Identity Pass's Clear program keeps setting records. At the end of April, it recorded the one millionth passenger passing through the Clear lanes at Orlando International Airport, its first installation (since 2005). As of now, there are more than 260,000 members in Registered Traveler programs, with specialized lanes at 22 U.S. airports.

Risk-Based "Global Entry" Expands. In previous issues I have contrasted the TSA's Registered Traveler program with the Customs & Border Protection's Global Entry program. Both are open to people who submit data for a background check, and if passed, receive a biometrically encoded ID card allowing them speedier passage at airports. However, the TSA does not actually do a background check on RT applicants, which is why members must go through exactly the same passenger and baggage screening at airports as non-members. By contrast, CBP's Global Entry is a risk-based program, and those accepted can re-enter the United States from airline trips abroad (at participating airports) via quick-service kiosks, rather than waiting in long lines to show their passports to an Immigration official. And last month the U.S. government signed an agreement with The Netherlands to allow reciprocal privileges between Global Entry and the Dutch equivalent, called Privium. Since TSA and CBP are both under th e new leadership of the Department of Homeland Security, perhaps there's still hope to turn Registered Traveler into the kind of risk-based program it was originally intended to be.

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Quotable Quote

"By mutually recognizing these two programs [Global Entry and Privium], the governments of the United States and the Netherlands will be making travel between our nations more convenient and secure." (emphasis added)
--Janet Napolitano, Secretary, Department of Homeland Security, Aviation Daily, April 27, 2009.

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Airport Policy and Security Newsletter #44

bob.poole@reason.org (Robert Poole) — Mon, 13 Apr 2009 19:48:00 EDT

In this issue:

Whole Body Scanning
Runway Safety Areas
Air Marshals vs. Armed Pilots
Luggage Pilfering and Airport Security
Outsourced Commercial Airports
News Notes
Quotable Quote

Whole Body Scanning—You Asked for It

Acting in haste after Sept. 11, 2001, Congress passed the Aviation & Transportation Security Act, mandating significantly beefed-up screening of passengers and their luggage. This was in response to the new threat of hijackers aiming to take control of planes and fly them into buildings, as well as the older threat (which had not previously been taken that seriously) of terrorists hiding bombs in checked luggage (such as the one that brought down Pan Am 103 over Lockerbie, Scotland in 1988). What Congress ignored, however, was the threat that terrorists willing to commit suicide (such as the 9/11 hijackers) might board planes carrying either liquid explosives or conformal plastic explosives hidden under their clothing. The former threat was hastily responded to by TSA after British authorities foiled a plot to down a number of trans-Atlantic flights with improvised liquid explosives; hence today's restrictions on carry-on liquids.

For years I've been pointing out the inconsistency in current policy of requiring 100% explosive-detection inspection of checked bags, but not of passengers or their carry-ons. Passengers still walk through 1960s-era metal detectors, which—repeat after me—detect only ferrous metals. So any kind of ceramic weapon or liquid or plastic explosive under their clothing will not be detected.

This is the context behind the Transportation Security Administration's gradual introduction of body-scanning technologies to replace—yes, replace—walk-through metal detectors. Despite the concerns of privacy advocates, millimeter-wave and backscatter X-ray technologies do work, spotting objects hidden under clothing and even hidden in body cavities. And they do so with really minimal radiation exposure. After several years of testing several different vendors' body-scanners as an option to pat-downs for secondary screening, TSA has begun putting them in a handful of airports as alternatives to the metal detectors. At least initially, it's offering an opt-out for those with privacy objections—go through the metal detector and receive a pat-down. So far, the TSA says only about 2% of passengers are opting out.

The three models of scanner currently in use—from L-3, Rapiscan, andAS&E—all require the passenger to stand still for 20 to 30 seconds, which means throughput will be slower than with metal detectors. Two scanners not certified yet by TSA for airport use, but in use at some European airports, do not require this dwell time. The Brijot GEN 2, which is a totally passive millimeter-wave system integrated with a full-motion video camera, can do the scanning while the passenger walks through. So can the UK ThruVision T4000 (which measures naturally occurring terraherz emissions from humans and objects). These passive systems offer faster throughput and zero radiation exposure—though I have not seen accuracy or cost data comparing them with the three TSA-approved systems. Those who object to body-scanning on privacy grounds should either get over it or should start questioning the underlying premise that every passenger is equally likely to be a threat and therefore needs the same degree of rigorous scrutiny—a premise I've questioned from the outset. With a truly risk-based approach, previously cleared Registered Travelers would generally be exempt from scanning, whether for metals or anything else. High-risk passengers would always require intense scrutiny. Those in between would get this kind of scanning at least on a random basis.

The threat of suicide bombers on commercial aircraft is real. Body shyness does not make it go away. As long as Congress insists on the all-passengers-are-equally-suspect principle, there is no realistic alternative (except pat-downs) to replacing metal detectors with body scanners for all passengers.

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Egregious Lapses on Runway Safety Areas

Over the last 10 years, according to a recent audit by the US DOT's Office of the Inspector General, 75 aircraft have overrun or veered off airport runways. ("Actions Taken and Needed to Improve FAA's Runway Safety Area Program," Report No. AV-2009-039, available at www.oig.dot.gov) Those accidents resulted in 12 deaths and nearly 200 injuries. Most of those casualties would probably been prevented had those airports met FAA standards for Runway Safety Areas. Unfortunately, airports and the FAA have been less than aggressive in bringing numerous runways up to snuff.

Late in 2005, after two high-profile accidents of this sort (at Teterboro and Chicago Midway Airports), Congress mandated that all commercial-service airports improve their Runway Safety Areas (RSAs) by 2015, with the FAA giving Congress an annual report on their progress. The OIG report finds that the FAA has not done a very good job, either of getting airports to act or of reporting accurately to Congress.

An RSA is defined as clear space on either end and on either side of a runway. At the end, there is supposed to be a space 1,000 feet long by 500 feet wide. And on either side, the clear space should extend 250 feet from the runway centerline. There are two main problems in meeting these standards. First, many runways are very close to bodies of water or streets and highways, making it costly to add the needed space. Second, many navigation aids (navaids) needed for instrument landings are currently located in the space that's supposed to be part of the RSA at a runway end.

Two work-arounds for these problems have been approved by the FAA and used by a number of airports. For those with less than 1,000 feet at the runway end, an Engineered Material Arresting System (EMAS) can be installed—a special concrete surface that can help the plane slow down and stop in a shorter distance than regular pavement. An EMAS was installed at Midway after the Southwest overrun in 2005 that killed one person on the ground. The work-around for navaids that can't be relocated is frangible bolts—special bolts that will shear off easily when the navaid is hit by a plane in the RSA.

In its audit report, the OIG found that airports and the FAA have made progress since Congress imposed the 2015 deadline. Out of 454 RSAs that were designated as high priority, 327 have been improved. But the audit's most important finding is that serious RSA shortcomings still exist at 11 major airports that handle over 25% of all passenger traffic—and most of them are not expected to be fixed by 2015. These airports include high-profile ones such as Reagan National, Boston Logan, Charlotte, Kennedy, LaGuardia, LAX, and SFO. The problems run the gamut—nearby water and highways, navaids, NIMBY and/or environmental litigation, etc. There may well be a case for Congress to do some environmental streamlining to get these projects moving before more lives are lost.

But the other major finding of the audit is that the FAA needs to get its act together. The OIG people found that in the FAA Office of Airports database on RSAs, 38% of the RSAs they reviewed had at least one data error—such as not reporting projects that had been completed or stating that an RSA meets standards when it does not. They found that FAA field offices all use different forms and terminology to report on RSAs, and headquarters does no data verification or quality control on what they report. Because of problems like this, the FAA's annual report to Congress on RSA progress "overstates the extent to which RSAs fully meet standards."

Another problem is lack of coordination between the FAA's Air Traffic Organization (ATO), which is responsible for navaids, and the Office of Airports, which is responsible for RSA compliance. You would think, with over $3 billion per year being handed out in Airport Improvement Program grants, that somebody would have made fixing the navaids-in-RSAs problem a priority for funding. Wrong. For some reason, "the Office of Airports is restricted from permitting airport sponsors to use AIP funds to address non-compliant navaids in RSAs." This is simply bizarre. Alas, while the OIG report made five recommendations, all of which the FAA officially concurred with, none of them specifically said that fixing the navaids-in-RSAs problem should be made a priority for AIP funding. It just said that the Office of Airports and the ATO should work out a plan to address the problem, without specifically mentioning the funding problem the audit had identified. As a frequent user of many of the 11 major airports, I'm not satisfied with that.

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Air Marshals vs. Armed Pilots

An editorial the March 17, 2009 issue of The Washington Times claimed that the Obama administration was quietly phasing out the Federal Flight Deck Officers (FFDO) program, under which pilots can volunteer for special training and then bring a gun with them when they fly (as pilots, many of them ex-military, did routinely in the 1950s, ‘60s, and ‘70s). The story was picked up and circulated widely among right-wing and Second-Amendment groups. What those groups failed to include was a follow-up piece in the same paper a week later, apologizing for the editorial being wrong and blaming this on recent transitions in the editorial department.

I was very relieved to hear this, and to read statements from federal officials and airline pilots' organizations affirming that not only is FFDO not being phased out, it's being expanded—at least to the extent of building a new training center in Dallas. Both the Air Line Pilots Association and the Airline Pilots Security Association reported positive discussions with the Department of Homeland Security about the continuation of FFDO.

That's important, because FFDO is quite possibly the most cost-effective aviation security program we have. I reported in Issue No. 41 (January 2009) on a cost-effectiveness study of U.S. aviation security programs, done at the University of Newcastle, Australia. Using a set of plausible assumptions, the authors compared the annual cost per life saved (on the assumption that TSA's overall efforts prevent one 9/11-type disaster every 10 years) of hardened cockpit doors and Federal Air Marshals. The latter are not the armed pilots we're talking about here; FAMs are full-time federal employees who ride, armed, in first class, not only costing taxpayers about $170K per FAM per year (a Congressional Budget Office estimate) but also costing airlines foregone front-cabin revenue. The relative costs worked out at about $800,000 per life saved for hardened cockpit doors versus $180 million per life saved for the FAM program.

Researchers Mark Stewart and John Mueller did not assess the FFDO program, but it's obvious that it is hugely more cost-effective than FAMs. First, there is no ongoing labor cost, just modest one-time training cost (and probably some recurrent training as well). Second, there is almost no cost to the airline, other than the training time; there is no loss of front-cabin revenue. And then there are the numbers. The official number of FAMs is classified, but you don't have to do much of a literature search to get widely accepted estimates of 2,500 to 4,000 (Wall Street Journal, Feb. 9, 2007). The FFDO program has trained 12,000 pilots, and assuming most of them are still flying armed, that's three to five times the number of FAMs. And assuming that FAMs still travel in pairs but that most FFDOs are the only armed pilot in a cockpit, the fraction of flights with an armed FFDO is six to 10 times the number with a pair of FAMs aboard.

The obvious question is, instead of only expanding FFDO, why isn't new Homeland Security Secretary Janet Napolitano proposing to scrap the wasteful and ineffective FAM program altogether? In February, the Australian government announced that it was cutting back its own air marshal program to fewer than 100 people (The Australian, Feb. 11, 2009). Now that's the kind of change I could believe in.

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Luggage Pilfering and Airport Security

There's been another spate of news reports recently about thefts from passengers' checked luggage. The TSA reports that thousands of passengers complain each year about such thefts. The complaints go to TSA on the assumption that it must be TSA screeners doing the pilfering. Such cases have certainly occurred; a Google search using "baggage screeners" and "theft" turned up over 7,000 hits. An ABC News investigation in November 2004 found that TSA screeners at 30 airports had been arrested for stealing.

But more recently the news reports I've been seeing involve airline baggage handlers. In the last few months, police arrested eight baggage handlers at Lambert St. Louis International Airport, operating what was termed a "massive theft ring." An April 2, 2008 ABC News report quoted an airline baggage employee at Houston's Bush Intercontinental Airport claiming that her co-workers routinely go through luggage to steal things. The same report cited undercover videos of similar thievery going on at Phoenix Sky Harbor.

Think about what this means in terms of airport security. If theft rings can operate in airline baggage areas, the same people that are opening luggage to take things out could easily be slipping things in. Like bombs.

The TSA spends about $5 billion per year on airport security, the vast majority of which is spent on passenger and baggage screening. Even if the TSA finally has its own screeners under control, if airline baggage handlers can get away with routine thefts from checked bags, that suggests a serious vulnerability in the checked baggage system. How about spending some of that $5 billion supervising the entire baggage chain of command?

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We've Had U.S. Airport Privatization for Decades

More than 20 years ago, when discussion and debate about airport privatization was first getting under way in the United States, I frequently reminded people that having private companies operating and managing U.S. airports was nothing new. There was Lockheed Air Terminal running Burbank and several smaller airports. And then there was Pan Am World Services, operating White Plains/Westchester (NY), Atlantic City, Bader Field, and Teterboro, all in New Jersey. We all know that Pan American World Airways, which originally owned the airport company, is long gone. But whatever happened to their airport company?

A recent article in Airport Business (March 2009) provided the answer, in the form of an interview with long-time executive John Harden and new owner Charles Stipancic. In the 1980s, the company was acquired by Johnson Controls, which ran it for awhile but later sold it to American Port Services (which mostly operates seaports). More recently, it was acquired by Macquarie Aviation North America, which also owns the Atlantic Aviation chain of fixed base operators (FBOs). But last year, as part of a whole series of divestitures and restructurings, Macquarie sold the airports company. Its new owner is Aviation Facilities Co. (AFCO) of Mclean, VA, a real estate firm begun in 1992, specializing in developing and operating airport facilities. Today AFCO operates facilities at 29 U.S. and U.K. airports, and is overseeing the construction of the new, privately owned Branson Airport in Branson, MO.

Harden told Airport Business that despite all the changes in ownership, AFCO's Avports Management LLC is still basically the same company that he went to work for in 1982, when it was still Pan Am World Services. Much of the management team and many of the employees have stayed the course. It's been expanding its string of airport management contracts, adding Albany, NY in 2006 and Stewart International in 2008 (after the Port Authority of New York & New Jersey bought out the long-term lease of former operator National Express). Besides those two, it still manages Republic and Westchester airports in New York, Atlantic City and Teterboro in New Jersey, and New Haven, Connecticut.

The magazine asked Stipancic and Harden about the broader question of U.S. airport privatization and their potential role in it—besides contract operation of smaller commercial airports, owning and operating FBOs, and developing the occasional new airport like Branson. Stipancic's response? "In the United States—whether it's next month, next year, or five years from now—privatization is going to happen. To me it's not a question of if, but when. With AvPorts being a leader at managing airports in this country, we think this puts us ahead of the power curve."

With Lockheed Air Terminal having become Airport Group International in the 1990s and subsequently being acquired by British company TBI, most people assumed there were no purely U.S. players in airport privatization. But the survival and growth of AvPorts tells us that isn't true. This will be an interesting company to watch.

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News Notes

Secondary Cockpit Barriers? In previous issues, I have discussed the potential vulnerability of airliner cockpits, despite the hardened doors installed after 9/11, since those doors are generally opened one or more times during flight. Aviation Daily (April 6, 2009) reports that the Air Line Pilots Association supports an approach being tested by United, which involves installing a $10,000 "wire unit" aft of the forward galley, to be snapped in place by a flight attendant whenever the cockpit door must be opened. ALPA is also having serious discussions with the FAA and Boeing about installing hardened cockpit doors on cargo aircraft, such as the forthcoming 777F.

LAX Victim of City Budget Cutbacks? Even though city-run airports are supposedly set up as "enterprise funds" and intended to be self-supporting, that is apparently not enough to prevent City of Los Angeles budget deficits from affecting LAX. An April 1, 2009 Los Angeles Times story reports that due to the projected $1 billion city budget deficit, all city departments and agencies may face layoffs and a new early retirement program. Besides LAX, the provisions would also apply to the other enterprise-fund departments, including the Port of Los Angeles and the Department of Water and Power. Needless to say, were LAX to be corporatized or privatized, the city's fiscal mismanagement would be irrelevant to LAX's finances.

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Quotable Quote

"The legacy airlines [In Europe] successfully requested that the current use-it-or-lose-it rule (the 80% rule—allocated slots must be used 80% of the time or returned to the slot pool) be suspended for two seasons. The [European] Commission agreed. . . . It is easy to see why the LCCs [low cost carriers] were so concerned. When you think about airline models, and which ones are working, there is only so much more scope for the LCCs to fly to regional airports and ignore potential customers. A growing percentage of their passengers are in fact on business. . . . That means access to mainstream airports—the very thing that the freeze will not allow. So we are seeing the struggling [legacy] carriers barring the growing and cashed-up carriers from some of the best bits of the playground. . . . This neatly highlights why the airports are outraged, too. They need passengers to come through their facilities to make money. A freeze on the slot rule stops others from using the capacity that they already have to do exactly that. It also shows the contempt with which the [legacy] airlines regard the airports. If you think this might be somewhat esoteric, think about Rome Fiumicino. The new-look Alitalia is only intending to use 400 of the 500 or so slots it has this summer—and summer is the busy time for Rome. Might others fly in during that period and open up what has been one of the least open and competitive airports in Europe? We will never know."
--Andrew Charlton, , "Slots: Time to Use or Lose the ‘Use It or Lose It' Rule," Aviation Advocacy, April 2009 (www.aviationadvocacy.aero).

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Airport Policy and Security Newsletter #43

bob.poole@reason.org (Robert Poole) — Wed, 18 Mar 2009 18:51:00 EDT

In this issue:

Inspecting all "belly cargo"?
Slot auction problems
Misguided bizjet security regs
Airport privatization in a soft market
News Notes
Quotable Quote

Full Cargo Screening Mandate Will Be Tough to Attain

Last summer, in Issue No. 37, I reported on the mandate imposed by the 9/11 Commission Act of 2007 that all "belly cargo" carried on passenger planes be physically screened by August 2010. I pointed out the estimated $4.5 billion equipment cost, plus the need to do most such inspections somewhere other than the airport, for reasons of space and timeliness.

The initial, relatively easy, deadline was to screen 50% of such cargo by February 2009. The Transportation Security Administration claims to have met this deadline, as airlines and freight forwarders concentrated their initial efforts on cargo carried on narrow-body planes. For the most part, such relatively small boxes can be put through the kinds of explosive detection system (EDS) machines used for checked luggage. The much harder problem is cargo carried on wide-body jets, on shrink-wrapped pallets or in large cargo containers. Neither shippers nor freight forwarders nor airlines want to have to unpack those pallets and containers and screen each individual box, which would be very costly and time-consuming. But so far TSA has not certified any technologies to screen whole pallets and containers—even though such technologies exist and are in use overseas.

There is progress to report, both in the technology area and in the logistics of getting such cargo inspected. Under TSA's Certified Cargo Screening Program (CSSP), shippers and freight forwarders can develop certified facilities for cargo scanning, with a secure chain of command to deliver scanned cargo to the airlines for loading. Last month TSA announced that it had certified 129 cargo screening operations under CSSP, mostly off-airport forwarders. It also announced that Mercury Air Cargo (based at LAX) had become the first independent facility (which accepts unscreened cargo from shippers and small forwarders) to be certified. Most of the others certified thus far are themselves large freight forwarders.

Technology vendor Rapiscan is negotiating with a number of airports to offer on-airport, turnkey cargo scanning centers. Its business model incorporates two approaches. At airports with a dominant carrier, it would develop the center in cooperation with that airline. At airports with many carriers, it plans to develop a common-use facility. The company offers two machines capable of scanning multiple-item pallets weighing up to 6,600 lbs. Competitors L-3 Communications and Smiths Detection also offer pallet-screening systems. Some L-3 scanners are now in use at Heathrow's Terminal 5, and in Amsterdam and Bangkok. TSA is still testing pallet-screening systems, however, and none has been certified for use in this country, as of this writing.

The global downturn in air cargo—in excess of a 20% decrease in December 2008 compared with the previous December—may ease the transition to 100% scanning, simply by decreasing the volume that must be coped with. Still, even if one or more pallet-scanning systems wins TSA certification by August of this year, it will be a big challenge to get such systems installed and in operation at thousands of sites by August 2010. It would not surprise me to have Homeland Security Secretary Janet Napolitano tell Congress by year-end that the deadline cannot be met—just as she told Congress last month that the 2012 deadline for scanning of all seaborne containers bound for the United States cannot be met.

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Whatever Happened to Slot Auctions?

In the absence of its Bush administration leaders, the Federal Aviation Administration seems to be backing off on its attempt to impose slot auctions on the congested New York-area airports. Earlier this month, the FAA asked the U.S. Court of Appeals for the DC circuit to hold in abeyance planned briefings on the airline lawsuit challenging the slot auctions, "until FAA determines whether [the proposed] rules should be withdrawn."

While I have long argued that market-based allocation of scarce airport capacity is far better than administrative allocation, my strong preference is for runway congestion pricing rather than slot auctions (see my "Congestion Pricing for the New York Airports," www.reason.org/ps366.pdf). Runway pricing is well-understood as being an airport owner/operator's prerogative, both in the guidelines of the International Civil Aviation Organization (ICAO) and, more recently, in the U.S. DOT's airport rates and charges policy. And while economists maintain that, in theory, either pricing or auctions should ultimately have the same impact, there are several practical reasons to prefer pricing.

First, runway pricing requires no new legislation, and any federal legislation on either pricing or auctions would be certain to contain numerous exemptions and regulations that would undercut its effectiveness. Second, pricing would clearly apply to foreign as well as domestic carriers, while there is significant legal history suggesting that foreign carriers might be exempted from auctions, raising level-playing-field issues with U.S.-based airlines that compete with foreign airlines. Third, runway pricing is a local option, consistent with the principle that airports are business enterprises that should make their own decisions about how to manage their capacity and service levels. (Despite the opposition of the Port Authority of New York & New Jersey to runway congestion pricing, I would not be surprised to see one or more other large, congested airports move in this direction once economic recovery leads to renewed airport congestion.)

Moreover, the history of slot allocation overseas is one of the legacy carriers using that system to protect their turf, at the expense of low-cost carriers (i.e., competition) and airline passengers generally. The legacy carrier organization, IATA, promotes its "Worldwide Scheduling Guidelines," under which a congested airport assigns its slots to incumbents, and only the occasional new slots that become available are subject to auction in a secondary market. Many economists have described this approach as cartelization, and I think they are correct. An illustration of cartel-like behavior under this system is provided by the current situation in Europe. The Association of European [Legacy] Airlines is lobbying in support of a proposal from the European Commission that would allow incumbent airlines to cut back on scheduled flights (due to the slow economy) but hang onto the slots that would be freed up thereby, suspending the normal "use it or lose it" rules. The CEO of low-cost carrier easyJet said this would "allow inefficient, poorly run airlines to hoard valuable landing slots rather than allowing unused slots to be returned to the many European airlines that are ready, willing, and able to operate them." He's right.

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Large (GA) Aircraft Security Program Taking Flak

Last October, in Issue No. 39, I wrote that the TSA's proposed Large Aircraft Security Program "looks like overkill." You'll recall that this program would subject business jets and turboprops weighing 12,500 lbs. or more to a security regime similar to that imposed on airlines—flight crew criminal history checks, passengers checked against TSA watch list, a new mandate on operators to prevent passengers from carrying prohibited items, and periodic audits to ascertain compliance. It would also impose new security requirements on many airports serving general aviation.

The reaction from the general aviation (GA) community has been understandably fierce. A number of members of Congress have expressed support for these concerns, notably the chairman of the House Committee on Homeland Security, Rep. Bennie Thompson (D, MS). His March 2, 2009 letter to TSA makes a number of good points, including the need for "a risk-based methodology and assessment specifically developed for general aviation aircraft and their passengers," the first time I've heard a member of Congress speaking up in favor of risk-based approaches.

While I am in general agreement with these criticisms, I think some GA defenders have gone overboard in claiming that the threat from GA planes is essentially zero. First, it's pretty obvious that "large" business jets such as the Boeing Business Jet (a 737 variant) or a Gulfstream V could become flying bombs comparable in impact to the airliners that hit the World Trade Center—especially if their cabins were loaded with fuel or other explosives. Even very light aircraft have been used recently by terrorists. In Sri Lanka, suicide attacks were carried out last month by Tamil Tiger terrorists using 1,600 lb. Z-143 light single-engine piston planes, packed with less than 500 lbs. of explosives. A proper risk assessment would take those capabilities into account.

But on the anti-TSA side of the ledger, there is also the question of how enforceable the regulations would be. The TSA Notice of Proposed Rule-Making would apply new airport security regulations to 315 commercial airports that serve private planes. But there are about 5,000 GA-only airports in this country, many of them accessible to business jets or turboprops. Moreover, a recent Government Accountability Office report ("Aviation Security: Status of Transportation Security Inspector Workforce") found that the agency is chronically behind in recruiting inspectors and determined that "TSA does not have a reasonable basis for determining the workforce needed to achieve [its] inspection goals." It also found that these inspectors only spend one-third of their time actually conducting inspections. (GAO-09-123R).

So I'm happy to concur with my friends in the GA community in suggesting that TSA take these proposed regulations back to the drawing board for a serious risk-based assessment.

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More Airport Privatizations Proposed, in a Soft Market

Last month, officials of the governments that own two more U.S. airports—Kansas City International and Connecticut's Bradley International—suggested they be considered for privatization, presumably under the FAA's Airport Privatization Pilot Program. But while city and state governments are in financial distress, making it attractive to cash-in their airports, the airport industry is in a slump due to the global recession. Moreover, the global credit crunch means financing such deals is more challenging than it was a year ago.

In Kansas City, Mayor Mark Funkhouser, formerly the city auditor, was the driving force behind a flurry of reports in late February about a possible airport lease. Several city council members were quoted as looking favorably on the idea. The city's well-respected airport director, Mark Van Loh, told the Kansas City Star that "We haven't really found any negatives" in the idea, and that the city should apply for one of the three remaining slots in the pilot program within the next month or so, to avoid being pre-empted by other cities. But in early March, Aviation Daily reported that the council's transportation committee was putting the idea on hold "out of concern that the issue leaves too many unanswered questions in these uncertain times," and that the committee does not want to rush into such a major decision.

In Connecticut, the state owns Bradley International, and it was Republican state legislators who suggested privatization, to help with the state's large budget deficit. Two bills have been introduced, one by Minority Leader John McKinney to study the privatization of Bradley and the other by Rep. William Hamzy to permit the state to privatize Bradley and the other five state-owned airports. In this case, Transportation Commissioner Joseph Marie opposes the privatization, telling the Hartford Courant that attempts elsewhere have been unsuccessful (whatever that's supposed to mean).

These new proposals come at a difficult time for both sellers/lessors and buyers/lessees due to the combination of an aviation slowdown and the debt market crisis. Aviation Week (Feb. 16, 2009) reports that airports privatized in 2006-07 were going for multiples of up to 30 times earnings, but that currently multiples of 7 to 12 are more likely, according to aviation economist David Bentley. That makes airports relative bargains for would-be acquirers like Fraport and various infrastructure investment funds—assuming they can find debt financing for a chunk of the transaction price.

An investment banker with experience in airport privatizations told me this week that a year and a half ago, such deals could be financed at a debt/equity ratio of 75/25. Today, however, 50/50 is more like it, with some deals requiring an even larger fraction of equity. On the other hand, banker ABN Amro managing director Justin Symonds notes that most airports that are tracked by rating agencies remain investment grade, and that both government-run and privatized airports have been able to refinance debt recently. Thus, potential purchasers of London Gatwick and possibly other BAA airports ought to be able to finance those deals, though more expensively than a year or two ago.

I am also hearing from reliable sources that the $2.5 billion Midway Airport deal is still expected to reach financial close within the next month or so. Assuming that prediction is on the mark, that will be good news not only for Chicago but for others interested in privatizing their airports.

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News Notes

TSA's Employee Screening Pilot Progam? Back in November 2008, industry publications told us that TSA would have a final report out by year-end on the results of its pilot program to test 100% employee screening of airport employees (and several alternatives). As I write this, it's mid-March, and no such report has appeared, nor is there any mention of it on the TSA website. Aviation Daily's Nov. 24, 2008 preview was tantalizing, quoting then-Administrator Kip Hawley as saying, "We also found that you can have excellent systems that do not require you to screen everyone just at perimeter," and that this involves "a risk management trade-off" that future administrations and Congress will have to deal with. So where is this report?

Branson Airport Lands Another Airline. Privately developed Branson Airport (in country music town Branson, MO), which has no FAA grant agreements and is therefore able to offer airlines exclusive deals on service to particular cities, has signed up a second airline. Sun Country airlines will serve Minneapolis-St. Paul from Branson, initially three times a week, from the date the new airport opens May 11th. That makes three exclusive cities announced thus far, since AirTran will be serving Atlanta and Milwaukee from Branson. The airport expects to announce another destination before the end of March.

Low-Cost Surface Radar System Unveiled. You may have wondered, as I have, what was going to be done to reduce runway incursions at the small and medium size airports that are not slated to get the highly effective (but expensive) ASDE-X system that keeps track of everything on airport runways, ramps, and taxiways. In 2007, the FAA issued a "Runway Safety Call to Action," asking for proposals for lower-cost systems for smaller airports. And in January it issued the first contract for such a system, to Thales ATM. Theirs is a radar-based system that costs about $500,000 (compared with $5-10 million for ASDE-X). Since it is a radar-only system, it's not as effective as ASDE-X, and provides alerts only to controllers, not pilots. But it's still big improvement over the status quo. The FAA plans to award several contracts to other vendors, as well, and will field-test the competing systems.

Advice to TSA, from WSJ's Scott McCartney. I was glad to see two of my reform ideas prominently featured in the Wall Street Journal's "The Middle Seat" column for Feb. 17, 2009. In offering his advice on how the Obama administration could reform the TSA, he picked up on my suggestion for turning Registered Traveler into a security program, as it was originally intended to be. That could be done by doing the same FBI criminal history background check on RT applicants as is routinely done for airport employees (who have at least as much access to airliners as passengers do). My other suggestion, seconded by former FAA security chief Billie Vincent, was to scale back the costly air marshals program, which is a highly non-cost-effective use of limited TSA resources. Security expert Bruce Schneier suggested a return to pre-9/11 levels of screening, using the money saved to improve intelligence, investigations, and emergency response.

Correction re Improved Airport Concessions. In last month's issue, I credited BAA with having revolutionized airport concessions by introducing competing brand-name retailers and street-pricing. That brought a very informative response from Skip Conrad of Oakland (CA) Airport. He pointed out that the "real pioneers" were corporatized airports Frankfurt and Amsterdam, with movie theaters, porn shops, etc. as early as the 1970s. Here in the United States, Conrad (as a consultant) introduced "market-based pricing" in several airport concession programs in the 1980s, including San Francisco, San, Jose, Denver, and Newark. And at Newark in 1986, his RFP for concessions included a brand-name requirement. The late Rich Griesbach brought local restaurants into Dulles and National airports in Washington, as Skip did at SFO in the 1980s. I'm happy to set the record straight on these innovations in airport concessions.

TSA Extending Expedited Entry for Flight Crews. The TSA announced earlier this month that its CrewPASS pilot program, which allows cockpit crews to bypass regular passenger screening checkpoints, will be extended beyond its original March 17 end-date; the program will now run until July 17. TSA will also begin testing a biometric component of the pass, as recommended by the Air Line Pilots Association.

Forbes Compares Fares by Departure Airports. The March 16, 2009 issue of Forbes includes a table listing the six most costly and six least costly commercial airports to fly out of in the United States, based on average fare per mile flown (using data from www.transats.bts.gov). The most costly is Cincinnati (a Delta fortress hub) at 48 cents per mile. Least costly is Southwest Florida International Airport in Fort Myers, at just 16 cents per mile. The full list is at www.forbes.com/airports.

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Quotable Quote

"There is a range of business models that's moving this industry to control more of the property and the process, because they have to have the vision and the authority to carry out that vision, since the other thing that's going on in the world is liberalization. What we call deregulation is now happening on the international side where increasingly, instead of a bilateral, there's Open Skies or liberalization. So instead of the various countries getting together and deciding where airplanes will fly, airlines decide where airplanes will fly. So it's up to the airports to try and attract and retain air service for their community. There's not a governmental entity doing that for you anymore. Now the market is doing it. That's prompted various competitive behaviors. Airports now conduct passenger surveys; they have to listen to their customers; put in different features; take responsibility for processes that maybe someone else should have responsibility for. As long as it affects the attractiveness of that airport to either a carrier and/or passengers, it's something that the airport has to be mindful of."
--Angela Gittens, Director General, Airports Council International, "Of Airports, Business Models," Airport Business, November/December 2008.

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TSA Coming Up Short on Cargo Checks

bob.poole@reason.org (Robert Poole) — Tue, 17 Mar 2009 10:46:00 EDT

USA Today's Thomas Frank writes:

A plan to check every package of business cargo for explosives before it is loaded onto passenger airplanes faces major obstacles, according to a government report scheduled for release Wednesday.

The report by Congress' Government Accountability Office says the Transportation Security Administration (TSA) may not have enough inspectors nor adequate equipment to guarantee all cargo is checked for bombs.

Frank and the GAO study are right to raise questions about whether the Transportation Security Administration can meet Congress’s August 2010 deadline for scanning all cargo carried on passenger planes. There are two bottlenecks, both at TSA.

First, the agency does not have enough inspectors to verify that freight forwarders and other handlers are complying with its scanning mandates.

Second, although large-enough scanning machines exist and are in service at some airports in Europe and Asia, the TSA has yet to certify any for use at U.S. airports. The cargo industry is scrambling to comply, but until TSA gets its act together, meeting the deadline will be very difficult.

Airport Policy and Security Newsletter #42

bob.poole@reason.org (Robert Poole) — Tue, 17 Feb 2009 11:00:00 EST

In this issue:

Stealth attack on airport privatization
TSA's flawed study on private screening
Airport expansion vs. inter-city rail
Limited profiling endorsed
Airport competition; why not here?
News Notes
Quotable Quotes

Stealth Attack on Airport Privatization

Last month Los Angeles City Controller Laura Chick gave the City Council a detailed report on functions the city could outsource or lease, to ease its fiscal crunch. Among those listed was a possible lease of Ontario Airport, one of three airports owned and operated by Los Angeles World Airports. Los Angeles thus becomes the 8th municipal government where public officials have suggested airport privatization during the past year—in addition to Austin, Chicago, Jacksonville, Long Beach, Milwaukee, Minneapolis/St. Paul, and New Orleans.

Two factors have triggered this new burst of interest: Chicago’s success in getting airline approval of its proposed $2.5 billion lease of Midway Airport and the increasingly dire fiscal straits cities and counties find themselves in, thanks to the worst recession since World War II. But there’s one big problem with these officials’ hopes: the federal government. To lease an airport that receives federal Airport Improvement Program (AIP) grants, you have to apply for one of four commercial airport slots in the federal Airport Privatization Pilot Program, which is what permits a municipal airport owner to take lease proceeds “off the airport” and use them for general governmental purposes. And that’s the potential roadblock.

The Pilot Program already provides a number of hurdles for a would-be privatizer, the most significant of which is the two-part airline approval requirement. The proposed deal must win the OK of 65% of the airlines operating at the airport and of airlines representing 65% of the annual landed weight. Chicago met that test in its Midway application, now awaiting final FAA approval this spring. But in the pending FAA reauthorization bill, the House Aviation Subcommittee wants to make this hurdle even higher, increasing the airline approval requirement to 75%. Moreover, the bill would also exclude privatized airports from receiving AIP grants—even though passengers using those airports would still pay the ticket tax which is the principal source of funding for AIP. (Still another problem is that there are now more would-be applicants than there are slots.)

These stealth provisions were quietly inserted in last year’s House bill by Aviation Subcommittee chair Jerry Costello (D, IL), with no debate and no testimony either for or against—my guess is that hardly anyone noticed they were there when last year’s bill was approved by the committee and sent to the House floor, where it was approved. No such provision appeared in last year’s Senate bill, which never made it to the floor. This year’s House bill, HR 915, is nearly identical to last year’s bill. And there in Sec. 143 is the same airport privatization deal-killer language.

It seems odd that a senior Democrat from Illinois, where Mayor Daley is setting the pace on airport privatization, would try to kill the Pilot Program by making it (a) harder to do, and (b) less attractive to airport companies. I’m also dismayed that the Republicans on the Aviation Subcommittee did not try to kill these poison pills. It’s not as if no alternative had been presented. The FAA’s own draft reauthorization bill (in 2007) proposed not only to eliminate the 65% approval requirements but also to expand the number of slots in the Pilot Program to 15.

It’s also odd that House Democrats would want to kill a program that could offer real help to hard-pressed medium and large municipalities, the majority of which are run by Democratic mayors. If these obstructions remain in the House bill (which seems to be on a fast track), the mayors’ only hope will lie in the Senate, where last year’s bill had no provision dealing with airport privatization. Perhaps a city-friendly member of the Senate Commerce Committee’s Aviation Subcommittee will revive the FAA’s proposed liberalization of the program.

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TSA’s Flawed Study on Outsourced Airport Screening

In 2007, the Transportation Security Administration awarded a $442,000 contract to Catapult Consultants to analyze the cost and performance of screening at airports with privately contracted screeners versus airports with TSA screeners. Two months after receiving the report in December of that year, the agency issued its own report on the same topic, with its own findings, developed using a different methodology. Neither report has been released, but thanks to an assessment of both by the Government Accountability Office (GAO), we can compare the two studies and speculate about what is going on (see GAO-09-27R).

For its initial cost comparison, the contractor selected six of the 10 airports using private screeners as part of the Screening Partnership Program (SPP) and matched them with six airports of comparable size and functions. Thus, San Francisco (SPP) was compared with Boston Logan (TSA), Rochester (SPP) with Salt Lake City (TSA), etc. This methodology, with an admittedly limited sample size, found that screening costs at the SPP airports averaged 17% higher than at TSA-screened airports. To obtain a larger basis for comparison, the contractor used data from all 450 airports with screening to create a regression model, which it then used to estimate the costs at the six SPP airports if they had TSA-provided screening. By that method, the SPP airports were only 9% more costly. But the contractor also pointed out that TSA maintains potentially redundant administrative staff and overhead at SPP airports, and those costs artificially inflate the estimated cos ts of SPP airports.

In its own report, the TSA used invoices from the private screening companies and internal budget data to conclude that SPP airport screening costs 17.4% more than TSA screening. In its review, the GAO pointed out that TSA left out of its cost comparison such things as workers compensation, general liability insurance, and some retirement costs for TSA screeners paid by the federal government (but not in TSA’s budget), as well as not accounting for the corporate income tax revenue paid to the government by screening companies. TSA also used just one year’s data. GAO also agreed with Catapult Consultants that there are TSA administrative and overhead costs at SPP airports that further distort the cost comparison.

The other dimension of both studies was screening performance. Catapult analyzed four performance measures: threat image projection detection rates by screeners, recertification pass rate of screeners, passenger waiting times, and passenger satisfaction. It used four years of data, again comparing the six SPP airports with the six comparable ones. It found that “SPP airports’ overall performance results are equal to or better than those delivered by non-SPP airports.” TSA’s own study selected five performance measures, but again used data for just a single year, and gave no analysis of the level of confidence in the observed differences between SPP and non-SPP airports. Moreover, GAO does not tell us what TSA concluded about these performance differences, only that it thought TSA’s comparison methodology was weak.

When it comes to comparing costs with performance, GAO notes that TSA did not do this, so it has no basis for deciding whether the reportedly higher costs of SPP screening might be justified by higher levels of performance. And because of the limitations in TSA’s methodology, GAO concluded that “We believe that TSA should not use [their] study as sole support for major policy decisions regarding the SPP.”

So what can we make of all this? It appears to me that TSA received a study from its contractor that revealed inconvenient truths—that SPP screeners performed better and probably at no higher cost than TSA screeners. Rather than release that study to Congress and the media, it quickly did its own study covering the same ground, ignoring some of its own costs and not making clear the results of its own limited performance comparison. And despite the original rationale for having Catapult do the study—which was “to assist senior TSA leadership with strategic decisions regarding the degree to which TSA should leverage public-private partnerships in the area of screening services”—it now tells GAO “that the agency maintains a neutral position on the SPP and neither encourages or discourages airports from applying to participate.”

That ignores what look to me like sensible recommendations from Catapult, namely, that TSA should:

Reduce its own general and administrative costs at SPP airports;
Expand SPP to improve performance at low-performance TSA-screened airports;
Use SPP at “hard-to-hire” airports and airports with large seasonal requirements;
Explore giving SPP contractors additional “degrees of freedom” to foster innovation, superior performance, and cost controls.

All of those sensible things are within TSA’s purview, under existing law. Let’s hope the new TSA Administrator takes a fresh look at them.

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Build High-Speed Rail Instead of Expanding Major Airports?

The U.K.’s Labor government has officially approved BAA’s long-standing request to add a third runway at congested Heathrow—but the opposition Conservative party has called instead for a $30 billion high-speed rail (HSR) line between London, Birmingham, Manchester, and Leeds. In Australia, a government study that called for building a second airport for Sydney (where expanding the existing airport is considered politically and socially unfeasible) has been challenged by a proposal from Canberra Airport (149 miles away) to become the second Sydney airport, via construction of a high-speed rail line between the two cities at a cost of about $15 billion. And one of the principal rationales under which California voters approved a $10 billion bond issue last November toward construction of a $50 billion north-south high-speed rail system was to avoid the need to expand airport capacity in both greater Los Angeles and the San Francisco Bay Area.

I doubt that any of these plans makes sense. Consider first of all the distinction between user-pays funding and general taxpayer funding. Airport expansion in the U.K., Australia, and the United States is paid for by airport users, primarily via airport landing fees and space rentals paid by airlines (and recovered from passengers via air fares). By contrast, inter-city high-speed rail’s capital costs are everywhere paid for out of general tax revenues, with operating costs mostly covered out of passenger fares. So the primary public policy question in deciding between airport expansion and HSR should not be “cost” but rather taxpayer cost. If the goal can be accomplished in one case (airport) at zero taxpayer cost and in the other (HSR) only at huge taxpayer cost, then the burden of proof should be on HSR advocates to justify the expenditure of billions of taxpayer dollars.

These days, the principal justification offered is that HSR is “greener” than commercial aviation. While that is often simply assumed by pundits and environmental groups, the data are far from clear. First, the amount of greenhouse gas (GHG) per passenger mile produced by electric-powered HSR depends considerably on the source of electricity. In France, such GHG emissions are low, since most French electricity comes from nuclear power. In the United States and Australia, by contrast, the majority comes from coal.

Second, you need to look at energy consumption per passenger mile. Back in 2004, Prof. Roger Kemp of the U.K.’s Lancaster University compared high-speed rail and airline energy consumption per passenger mile, and found very similar levels for an Airbus A-321 and both the French TGV and the German Inter City Express. More recently, Mikhail Chester and Arpad Horvath of UC Berkeley did a lifecycle analysis of GHG impacts of various transport modes, and found air travel to be environmentally competitive with rail travel.

Third, you need to estimate carefully how much of total airport flight activity might be replaced by a given HSR route. Relatively short-haul trips such as those between London and Birmingham or Los Angeles to San Jose are a relatively small fraction of total activity at major airports such as LAX or Heathrow. In Reason Foundation’s recent “Due Diligence” report on the proposed California HSR system, the authors found that HSR would not significantly reduce the need for additional airport capacity in that state (www.reason.org/ps370.pdf).

Finally, in the case of Heathrow in particular, not expanding its capacity would exacerbate the huge projected airport capacity shortfall in Europe. A Eurocontrol study released in December projected a doubling of passenger traffic by 2030 and the likely saturation of 20 large EU airports. Privatized Fraport recently received final approval to add a fourth runway at Frankfurt, after it reached a deal to pay $858 million to buy up and move a chemical plant located on land needed for the runway. Needless to say, BAA should only build the third Heathrow runway if it pays market value for the 700 homes in Sipson where the new runway would go. And that cost will properly be factored into what airlines and passengers will pay to use the expanded Heathrow.

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Limited Profiling Judged Cost-Effective

A key element of risk-based security is the attempt to devote relatively fewer resources to people or locations with low probability of being threats and relatively more resources to those more likely to be threats. This is the premise behind the original concept of Registered Traveler, which some have termed “positive profiling,” since it seeks to create a lower-risk group of passengers by requiring them to pass a background check. But what about identifying the higher-risk group?

That is what secondary screening is all about, to the extent that it is not done solely on a random subset of all passengers. Political debate tends to equate “profiling” with ethnic or religious stereotyping, but even profiling based on statistical risk factors (e.g., paying cash for a one-way ticket) may be open to question on the grounds that the number of potential terrorists is so small compared to the number that match such a profile as to waste a lot of passenger and security system time and resources.

Can mathematics help to resolve this dilemma? The Feb. 10, 2008 issue of Proceedings of the National Academy of Sciences contains a paper suggesting that it can (www.pnas.org/cgi/doi/10.1073/pnas.0813202106). The author is William H. Press, a computational biologist and computer scientist at UT Austin. The paper’s math is beyond me, my calculus having gone mostly unused since my MIT days. So I’m relying here on the New York Times article by Sandra Blakeslee, Feb. 2, 2008, for a simplified explanation of Press’s paper.

The aim is to find an optimal strategy for using prior information to better target screening. The starting assumption is that intelligence agencies can come up with probabilities that individuals meeting a certain profile are more likely to be bad guys. Suppose that certain people are 100 times more likely to be a bad guy than the average passenger. Three alternative policies might be:
1. Always select people with that profile for secondary screening;
2. Select such people 100 times as often as others;
3. Screen them at random, the same as everyone else.

Press’s math concludes that number 1 is the worst option, because it devotes far too many resources to those meeting the profile, with no guarantee that the real bad guy actually matches the profile. Number 2 still subjects far too many innocent people to secondary screening, using scarce security resources. But number 3 misses the opportunity to use the profile data to try to do better than random checking.

Press recommends “square root biased sampling” as the best compromise, somewhere between #2 and #3. In this well-known sampling technique, people matching the profile would be selected for secondary screening 10 times (the square root of 100) as often as people not matching the profile. This method of sampling is often used to identify significant events that might be otherwise lost in a sea of data; Press has used it to find bits of DNA in his computational biology research. He told Blakeslee that it occurred to him when he was passing through airport security that the method could be applied to the profiling problem.

This approach could be incorporated into TSA’s new Secure Flight system, being rolled out this year to replace its antiquated CAPPS (Computer-Assisted Passenger Pre-Screening) system. And it would nicely complement a revised Registered Traveler program that actually did a criminal history background check on applicants, and permitted those who passed to avoid the checkpoint strip and laptop removal so frustrating to frequent flyers

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Airport Competition: Why Not Here?

In December, the U.K. Competition Commission recommended that the government break up BAA’s near-monopoly of London and Scottish airports, by ordering it to sell Gatwick and Stansted in London and Edinburgh in Scotland. When the Thatcher government privatized the former British Airports Authority as a single company in 1987, it missed an ideal opportunity to create competition, by selling the airports separately. Competition, rather than price-cap regulation, would have then dealt with the potential of monopoly-like behavior. Assuming the government accepts the recommendation, this historic mistake will belatedly be corrected.

But airport monopoly is not confined to Britain. In the United States, the few metro areas that have more than one major commercial airport generally have only a single airport provider—Chicago, Houston, Los Angeles, and New York being cases in point. The most notable exception is the San Francisco Bay Area, where San Francisco, San Jose, and Oakland are all transcontinental airports but operated by separate, competing entities. Dallas is a partial exception, with Love Field providing a limited degree of competition to DFW. And LAX and Ontario (both operated by Los Angeles World Airports) do have some long-haul competition from Burbank, Long Beach and Orange County.

Is it completely fanciful to imagine antitrust laws ever being applied to U.S. airport quasi-monopolies? This question came to me as I read the powerful new paper by Michael E. Levine, “Airport Congestion: When Theory Meets Reality,” in the current issue of the Yale Journal of Regulation (Vol. 26, No. 1, 2009). The paper is a greatly expanded and far more sophisticated discussion of the subject Levine addressed in his 2007 Reason Foundation policy brief: the real-world difficulties of pricing airport access to address chronic congestion. He expands and elaborates upon his criteria for a new congestion pricing solution, one of which is that airport monopolies must be addressed. (The entire Levine paper is well worth reading, but my focus here is on this single point.)

The problem, exemplified by the three major New York airports, is that “public airport authorities are famously a source of political patronage, vehicles for statements of public grandeur, recipients of Airport Improvement Program pork, and, where exempted, extractors of monopoly rents from airlines.” Thus, Levine fears, correctly, that if such congested airports could charge whatever the market would bear for landing at peak times, they would not be likely to use the proceeds for (politically unpopular) capacity expansion, which is where the proceeds would do the most good (and be in the interest of those paying the higher charges).

While noting that U.K.-type divestiture “is almost inconceivable politically” in the United States (given the political clout of senators and representatives from the urban states where congested monopoly airports are located), Levine follows up with this provocative thought: “Perhaps the financial pressures on municipalities that have made airport privatization more attractive could allow an expansion of the privatization program to be a politically acceptable vehicle for breaking up monopolies, if privatization were made subject to antitrust provisions.” And he notes that “As a result of Midway’s privatization, Chicago airports are no longer a monopoly,” though Midway cannot compete for most international service because its runways are too short.

This is certainly thought-provoking. Would Houston Airport System (which already has a successful privatization subsidiary) consider privatizing Hobby Airport to raise capital to expand that business? Might Los Angeles accept its City Controller’s suggestion to lease Ontario Airport? And might the Port Authority of New York & New Jersey someday contemplate leasing, say, LaGuardia, to raise capital for turning Stewart into the major airport it could become?

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News Notes

Secondary Cockpit Barriers. Strengthened cockpit doors are widely acknowledged as the most cost-effective post-9/11 security reform. But are they sufficient? A small number of pilots has been pushing for the addition of secondary barriers, since (especially on long flights) the cockpit door must be opened several times in flight, for rest-room and food access for the cockpit crew. The FAA is now considering a Part 121 change that would define criteria for secondary barriers. A meeting on this subject takes place in Washington March 3-4, 2009.

BAA Adds Fourth U.S. “Airmall”. BAA USA, which introduced competing brand-name retailers and street pricing to U.S. airport concessions with its original Airmall at Pittsburgh International Airport, has landed its fourth Airmall contract. The new one is a 10-year agreement at Cleveland Hopkins International Airport. Cleveland joins previous BAA operations at BWI, Boston Logan, and Pittsburgh.

NetJets Purchases German Airport. Limited access to slots at congested Frankfurt International Airport has led fractional provider NetJets to purchase nearby Egelsbach Airport, a general aviation airport within the Frankfurt metro area. As a non-scheduled operator, NetJets typically had to submit slot requests just 24 hours in advance of need, and two-thirds of those were turned down, which constrained the company’s growth. Neighboring communities agreed to sell their stakes, since the airport had been losing money, and NetJets agreed to a curfew between 9 PM and 7 AM. It will also invest in upgrading the airport to serve larger business jets.

RAND Terrorism Database. In early February, RAND Corporation announced the availability of the RAND Worldwide Terrorism Incident Database, which encodes over 36,000 incidents recorded over several decades. Access is by subscription only, and 30% discounts are available until April 1, 2009. Details at: www.rand.org/ise/projects/terrorismdatabase

Airport Company Share Prices. The Centre for Asia Pacific Aviation keeps tabs on the share prices of publicly traded airport companies. For example, their December 2008 Airport Investor Monthly included a bar chart showing recent price changes for 21 such companies. Some are airport funds, such as Macquarie Airports, Infratil, and Australia Infrastructure Fund, others are multi-airport operating companies such as Fraport, ASUR, and Airports of Thailand, and some are essentially single-airport companies (Copenhagen, Vienna). In case you’re interested, in that December chart, only six of the 21 showed increases in share price.

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Quotable Quotes

“No longer forced to exclusively serve the interests of home-based national carriers, airports now play a key role in driving airline competition. As a result, airport owners and managers across the world are building on this entrepreneurial focus with diversified ownership models including corporatization, private-public partnerships, and full privatization. Such models free airport operators from political interference and red tape, allowing them to focus on the needs of the traveling public and their competitive position.”
--Angela Gittens and Olivier Jankovec, Airports Council International, Letters section, Wall Street Journal, Dec. 9, 2008.

“There has been little speculation about the incoming Administration’s likely attitude towards airport financing, which is yet to register on the radar. . . . U.S. airports, run typically by local councils with private investment by airlines, have become generally unattractive and uneconomic pieces of infrastructure. Airport privatization outside the U.S. has not been universally praised as a concept in action. But certain features have tended to emerge. Where adequate regulation is in place, the quality of infrastructure delivered has generally exceeded the government-delivered standards—especially when the level of government is local.”
--“Airport Privatization,” Airport Investor Monthly, Issue 50, December 2008 (Centre for Asia Pacific Aviation)

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Who Is Going to Pay for Air Cargo Screening?

bob.poole@reason.org (Robert Poole) — Fri, 06 Feb 2009 12:17:00 EST

“Legislate first, analyze later (if at all)” has been the rule Congress has followed ever since 9/11, passing costly mandates without any solid analysis of what they will cost or how effective they’re likely to be. That’s certainly true of such feel-good measures as the large expansion of air marshals and the $5 billion a year passenger and baggage screening circus we’ve been stuck with since shortly after 9/11.

More recently Congress decided to close a “loophole” in airline security. To be specific, although every piece of checked luggage must, by law, be screened for explosives, packages and cargo pallets go into the same cargo holds in the belly of passenger planes with only spot-checks and assurances that they have been sent to the airport by “known shippers,” vetted by the Transportation Security Administration. To be sure, this approach to airline “belly cargo” is inconsistent with the 100% checked-bag screening requirement. But the alternative way of fixing the inconsistency would be to shift the policy on checked bags to something more sensible and less costly.

But 100% belly cargo screening is now the law, and understandably, airlines, airports, and freight forwarders are upset about this new unfunded mandate. The big problem is not small packages, which is mostly what goes in the belly compartments of single-aisle planes like 737s. The problem occurs with wide-bodies (like 767s) whose belly is large enough to hold cargo pallets. Those large pallets often include lots of different items shrink-wrapped onto the pallet—making an object way too big for the kinds of expensive CAT-scan-type devices used for luggage screening. Unless, that is, the pallet is disassembled and the individual items sent through the scanner—a labor-intensive and time-consuming process.

So the freight forwarders are asking for federal funding to help them buy the much bigger machines they’d need to scan entire pallets. It’s an understandable request, and I’m generally on the side of those faced with costly unfunded mandates from government. But this example raises the larger question of who should pay for aviation or transportation security—all taxpayers, or those who use a particular mode of transportation? Air cargo competes with other modes of shipping—trains, trucks, and ships. If aviation is, in fact, a much bigger terror target than these other modes, shouldn’t the cost of shipping by air reflect that higher cost of securing that mode? If the freight forwarders have to pay for the machines themselves, that cost will get factored into the cost of shipping goods by air rather than via some other mode.

They do this in Canada by means of a tax on aviation customers aimed at covering the full cost of aviation security. The alternative is simply to let the providers of air transportation pay the costs of whatever security is mandated, and build that cost into what they charge their customers. Today, in the United States, we use a patchwork mix of airline and passenger security taxes, general taxpayer funding, and mandated private-sector expenditures (unfunded mandates). It would be far cleaner and more transparent to do it Canada’s way.

But more than anything else, we need to start making aviation security (and all homeland security) policy based on risk-analysis and cost-effectiveness analysis. That would very likely reduce the cost substantially, regardless of who pays for the resulting security expenditures.

Airport Policy and Security Newsletter #41

bob.poole@reason.org (Robert Poole) — Thu, 01 Jan 2009 00:00:00 EST

In this issue:

Is U.S. airport security cost-effective?
New technology for perimeter security
Jacksonville, Long Beach consider privatization
PFCs and FAA reauthorization
News Notes
Quotable Quotes

Is U.S. Airport Security Cost-Effective?

I have sometimes characterized the U.S. Congress's response to 9/11 as "legislate first, analyze later," though in view of the dearth of analysis in the seven years since enactment of the Aviation & Transportation Security Act (ATSA) of 2001, it's more like "legislate first, analyze never." Fortunately, academic researchers are starting to take a serious look at the value of what Congress has mandated-and the results tend to support my skepticism. Last fall I had the opportunity to develop a discussion paper for the OECD's International Transport Forum, specifically for a December workshop on security, risk, and cost-benefit analysis. In the course of preparing the paper, I discovered an important piece of analysis by Mark Stewart and John Mueller called "A Risk and Cost-Benefit Assessment of U.S. Aviation Security Measures," published in the Journal of Transportation Security, Vol. 1, No. 3 (http://hdl.handle.net/1959.13/28097).

The problem with applying conventional cost-benefit analysis to anti-terrorism measures is how to quantify the benefits. The costs are relatively straightforward, despite some numbers being classified. But the benefits are events that did not happen because of the measure that was implemented. With terrorism events being few and idiosyncratic, it's very hard to come up with defensible quantitative benefit values.

Stewart and Mueller's key insight is to borrow from regulatory analysis the idea of relative cost-effectiveness. U.S. regulatory agencies routinely develop estimates of the number of lives they think are saved per year by their safety regulations, and the annual costs of those regulations are generally straightforward to estimate. (They include a table in their paper showing the huge range of cost/life saved, ranging from a low of $100,000 for FAA's aircraft cabin fire protection standard to a high of $6.78 trillion for EPA's hazardous waste listing for wood preservatives.)

For aviation security, Stewart and Mueller provide a list of 20 measures mandated by ATSA, 14 of which apply at the airport (mostly passenger and bag screening) and six dealing with in-flight security. They assume, consistent with most expert opinion, that in-flight measures such as strengthened cockpit doors and changed procedures have made a big difference in reducing the risk of a 9/11 repeat, so they estimate that those measures account for half of whatever reduction in such attacks has taken place. And on that score, they make the further assumption that in the absence of the ATSA measures, one 9/11 type attack would occur every 10 years (resulting in 3,000 deaths). Hence, the annual benefit is 300 lives saved per year.

They then group the six in-flight measures into three: hardened doors, crew and passenger resistance, and air marshals, and make a starting assumption that each has contributed equally to the in-flight measures' overall 50% of the reduction in attacks; hence, each of the three accounts for 16.67% of the total. But because air marshals are present on only a fraction of flights (they generously assume 10%), the risk reduction due to air marshals alone is 10% of 16.67 or 1.67%. With the average annual cost of hardened doors at $800,000, and the annual cost of air marshals estimated at $180 million, you can see that hardened doors are hugely more cost-effective (in terms of cost/life saved) than air marshals. Stewart and Mueller also do a sensitivity analysis, showing that the same general conclusion is reached for a wide range of assumed numbers.

In my paper, I took their methodology one step further. Using budget numbers showing that about $4.7 billion of TSA's $6.7 billion budget is spend on airport-related security (excluding cargo security), I estimated that the set of 14 airport-related measures has a cost of $31.3 million per life saved, which is 39 times that of hardened cockpit doors. The U.S. DOT, in assessing the cost-effectiveness of transportation safety regulations, uses $3 million per life saved as a benchmark.

This kind of quantification, crude as it may be, supports the seat-of-the-pants judgment of many aviation experts that hardened cockpit doors are the best measure to come out of ATSA-and that most of the passenger and bag screening rigamarole (along with air marshals) is very likely a waste of money. It also over-emphasizes the land-side at the expense of insufficient attention to threats from the airside (see next item).

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New Technology for Airport Perimeter Security

Airports are very large land uses, which means their perimeters are often many miles long. Yet relatively little is being spent to secure that perimeter so as to keep bad guys from gaining access to planes or facilities, compared with the billions spent each year on passenger and bag screening to keep bad things getting from the terminal to the planes. It's like having super locks on the front door, while leaving the back door unlocked.

One new approach is thermal imaging cameras. They have several potentially important advantages. First, they have very long range (up to 26 km., according to manufacturer Axsys Technologies), meaning that a few can cover a large area. They can generate a clear image without illumination, since they are passive devices that capture thermal radiation from various objects, so they can operate day or night. They can also interface with the airport surface detection equipment (ASDE-3 and ASDE-X), to use ASDE signals to help detect humans in the air operations area. Thermal imaging cameras are in operation at JFK Airport, interfaced in this way with ASDE-X. They are also being used at LaGuardia to monitor the location of contract personnel, rather than having human escorts with them all the time. John Cimba of Axsys told Aviation Daily that the costs for the thermal camera system at LGA were $400,000, which he compared with the estimated $3 million c ost of a video camera system sought by Washington National Airport for perimeter protection.

The other promising technology is "intelligent video cameras" linked by a secure wireless network. This approach was developed by the Naval Surface Warfare Center in Panama City, Florida. The "intelligence" consists of software that can differentiate between "normal" and "abnormal" images, and provide an alert in case of the latter. This approach is being considered for the new Panama City-Bay County Airport, currently under construction. Initial tests are being carried out at the existing Panama City airport. No cost figures for this approach to perimeter protection have been release yet, as far as I can determine.

I'm glad to see relatively more attention being paid to this generally weak point in airport security.

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Jacksonville, Long Beach Looking Into Airport Privatization

The new year began with two U.S. new airports added to the list of those looking into privatization. The Long Beach (CA) City Council had a closed session on January 6th to discuss the pros and cons of privatization, the Los Angeles Times reported. According to that report, both J.P. Morgan and Merrill Lynch have expressed interest in a possible lease of the airport, under the federal Airport Privatization Pilot Program.

And a recent interview with John D. Clarke, the CEO of the Jacksonville (FL) Aviation Authority several months before, revealed his interest in partial privatization for that airport. Clarke, who is the incoming chairman of Airports Council International-North America, told Airport Business (October 2008) that he is looking seriously at "taking the operations of Jacksonville International Airport and creating a 25-year master concessionaire operation, where we would allow a private company to come in and manage that airport." The interviewer asked if he means just retail concessions, and Clark replied: "I'm talking about everything except airfield operations. It's not privatization; but it is trying to figure out if we can get a balance between what the private sector seems to do better than what we can do. . . . We don't want to give up any ownership. It would be a master lease agreement. They would do the airline negotiations; we would be the body above that would approve. The private sector would do the capital investments; take over the operation of the terminal, the parking garages, the hotels, the ground transportation."

Seeking further clarification, the interviewer asked, "Is it basically contract management [a la Albany and Burbank]?" and Clark replied, "The difference between this and contract management is that we would not pay them to do it. They would in fact pay us. Just like a concessionaire in the terminal would pay a percentage. We're exploring how that works. The board has put together an ad hoc committee to do all the due diligence." He also noted that the Aviation Authority has an ongoing relationship with privatized Gernan airport company Fraport and has had discussions with Macquarie, as well as the FAA.

While Clark stresses the uniqueness of what Jacksonville is considering-basically leasing the terminal and related land-side portions of the airport-that is not entirely unprecedented. To the south of Jacksonville, the terminals at Orlando Sanford Airport were developed and are operating under a long-term concession model by Abertis, which acquired airport company TBI several years ago. Terminal 4 at JFK International was developed and is operated by a private-sector consortium under a long-term concession agreement. And there have been a number of long-term concessions for new airport terminals in Latin America and the Caribbean.

To the best of my knowledge, leasing only the land-side of the airport would not require going through the provisions and procedures of the federal pilot program, which is mainly about getting exemptions from various FAA grant assurances that relate primarily to the use of revenue derived from landing fees. Both JFK and Orlando Sanford were allowed to proceed with their terminal projects without applying under the pilot program. If I'm correct about this, should Jacksonville proceed with such a plan, it would therefore not use up one of the three remaining slots for commercial airports in the pilot program.

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Passenger Facility Charges and Reauthorization

I don't know about you, but I spend a lot of time in airport terminals, and the differences among them are striking. Those that have either been built or revamped within the last decade or so have enough space in the gate areas to hold the number of passengers that are now common with 80+% load factors; many of the others do not. Newer ones have brand-name retailers offering a wide variety of goods and services, rather than a few generic or monopoly brand-name outlets. Some of the newer ones actually have jetways that work for the lower-to-the-ground regional jets, so you don't have to trudge across rainy or snowy tarmac to get to the plane.

My point is that a lot of airport terminals need work, in addition to the need at a number of key airports for more runway capacity, high-speed turnoffs from runways, etc. In the face of this need for more airport investment, Congress faces a clear choice, when it crafts the legislation-more than a year overdue-to reauthorize the Federal Aviation Administration.

There are two key federal programs that affect airport investment. One is the typical centralized federal tax-and-grant approach represented by the Airport Improvement Program (AIP). About $3 billion per year that comes mostly from the passenger ticket tax gets allocated by Congress in the form of AIP grants; it's very much like federal highway grants, allocated by complex formulas. And like the highway program, there is considerable redistribution and pork involved. Passengers using large hub airports generate 69% of the ticket tax money, but large hubs get only 21% of AIP grants; medium hub passengers generate another 20% of the tax revenue, but medium hubs get only 12% of the grants. For small and non-hub commercial airports it's the other way around: those two categories generate 11% of the revenue but get 33% of the grant money. And "other" passengers (those on air taxis and fractional jets, using general aviation airports) produce just 0.2% of the revenues but those "other" airports get a whopping 35% of the grants. As I said, it's a lot like the highway program.

The other option was designed to help address this problem, especially for large and medium airports. At the beginning of the 1990s, Congress repealed a long-standing prohibition on airport self-help, permitting airports to levy passenger facility charges (PFCs) specifically to fund facilities at the airport in question. Note the contrast with AIP: no centralization, no redistribution, no pork. Basically, this was a step toward deregulation of airports, permitting them to act like the businesses they are in principle, and should be in fact. To be sure, Congress set a cap on PFCs (initially $3, later increased to $4.50), and requires the FAA to approve the specific projects for which an airport levies a PFC. But overall, this partial defederalization has worked very well. After some initial hesitancy, the bond markets got comfortable with airports issuing revenue bonds backed by PFC revenues. And despite perennial airline rhetoric about airports us ing PFCs to build "Taj Mahals," the $65 billion in investments made possible by PFCs have done wonders for airports.

But two factors make it important for Congress to increase the $4.50 cap on PFCs as part of the FAA reauthorization bill. The first is inflation. Since 2000, when that level was enacted, construction cost inflation has been considerable, so $4.50 in 2009 doesn't buy what it did in 2000. Second, nearly all current PFC revenues are committed either for cash outlays on projects already under way or debt service on projects already completed. Tens of billions in further terminal and runway expansions still need to be carried out, mostly at large and medium hubs-but those are the kinds of airports that are short-changed by the way Congress distributes AIP funds.

Many of my conservative and libertarian friends too quickly equate a PFC with a tax, as if it were some kind of general levy that was sent to Washington and frittered away on airports to nowhere. On the contrary, a PFC is a self-help user fee, which you only pay if the airport you use needs to make capital investments that will serve you better, as a passenger. It's the kind of devolution that many of these same people are calling for in the highway program. I hope they will join me in supporting the strengthening of this important funding mechanism.

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News Notes

Branson's Private Airport Landing Airline Partners. The new privately developed airport for Branson, MO will not use any federal Airport Improvement Program (AIP) funds, so it will not be bound by the normal FAA grant assurances. So, as reported here in Issue No. 36, it can offer airlines exclusive rights for service to particular cities. Last month, Branson Airport signed the first such deal, granting AirTran exclusive rights to serve the airport from Atlanta for what is reportedly two years. Aviation Daily (Jan. 6, 2009) reports the company is negotiating a second airline deal. The airport is set to open May 11th, following a two-day air show featuring the USAF Thunderbirds.

NRC Questions Data Mining and Behavior Detection. The National Research Council, the research arm of the national Academy of Sciences, released a 352-page report in October that assesses the scientific validity of two techniques many consider useful in dealing with terrorism. On behavior detection, currently used by the TSA at airports, the report says there is no scientific consensus that the technique is ready to use for detecting complex behaviors such as deception, as opposed to simple distress. And while data mining has useful commercial applications, the NRC researchers said it is questionable whether data mining can detect and pre-empt terrorist attacks. (www.cnn.com/2008/US/10/07/terrorism.behavior).

International Registered Traveler Now at Seven Airports. The only true (risk-based) U.S. registered traveler program-Customs & Border Protection's Global Entry-has expanded from Houston, New York (JFK), and Washington Dulles. It is now also available to travelers re-entering the United States at Atlanta, Chicago O'Hare, Los Angeles, and Miami. Would-be members pay a $100 fee and must pass both a background check and an interview. They may then bypass regular passport control and go to a kiosk where they can scan their passport and biometric ID card. During the trial period at the initial three airports, 1,100 people signed up for Global Entry.

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Quotable Quotes

"The place where we can get the most leverage for our terrorism dollars is at the beginning, working with overseas police to roll up terrorist financing through effective intelligence; and at the end, with emergency response and disaster relief. The stuff in the middle that requires us to guess the plot correctly really is a waste of money."
--Bruce Schneier, quoted in "Man-Made Disaster," by Jeffrey Rosen, The New Republic, Dec. 24, 2008 [Note: that whole article is well worth reading.]

"The importance of operational improvements grows as infrastructure projects become more complex. Macquarie and Ferrovial's co-investment in the UK's Bristol International Airport, for example, involved upgrading signage systems; renewing check-in, baggage reclaim, and catering facilities; rerouting foot traffic; and installing all-weather landing equipment. The investors also rejuvenated the airport's retail offering, strengthened the management and sales teams, and even tweaked the system for booking parking spaces. In the four years after the acquisition, the number of passengers using the airport doubled-as did its EBITDA. . . . It would be unthinkable for an investor with no expertise in the transport sector to make these decisions."
--Robert N. Palter, Jay Walder, and Stian Westlake, "How Investors Can Get More Out of Infrastructure," The McKinsey Quarterly, February 2008. (http://e.mckinseyquarterly.com)

"You are not going to get 100% [cargo scanning overseas for incoming cargo at ports], because you can't make every other country do that. And when people in Congress say 'How dare you say you're not going to do 100%?' I feel like saying, 'Well what do you want me to do? Promise we'll invade every country that doesn't allow us to scan?'"
--Homeland Security Secretary Michael Chertoff, Christian Science Monitor breakfast, Dec. 10, 2008, as reported in Traffic World, Dec. 15, 2008, p. 14

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Airport Policy and Security Newsletter #40

bob.poole@reason.org (Robert Poole) — Sat, 01 Nov 2008 00:00:00 EDT

In this issue:

World airport privatization study
Why Registered Traveler is not a security program
Airports and competition
Check boarding passes at the gate?
Terminal bomb scanner
News Notes
Quotable Quotes

New Global Airport Privatization Report

In my discussions with reporters and municipal officials over the prospects of U.S. airport privatization beyond the impending Midway Airport transaction, I'm continually amazed at how little they seem to know about the scope of this phenomenon worldwide. I've tried to fill that gap via a recap each year in Reason Foundation's annual privatization reports, posted at www.reason.org. But those reports are only snapshots.

So I'm happy to report that this information void has recently been filled by a highly detailed 128-page report, World Airport Privatization: 2008 and Beyond. It comes from David J. Bentley Associates in Manchester, UK. The report provides an excellent history of airport privatization, organized by type of transaction (initial public offering, lease/concession, build-operate-transfer, trade sale (auction), and corporatization/commercialization). And that's just Chapter 1. The second chapter provides a region-by-region, country-by-country review of which airports have been privatized, under what circumstances, and by what method. This is really the heart of the report, accounting for more than half the page count.

If you are a mayor considering privatization and people ask you if there are actually experienced airport companies that might be interested, and financiers available to do the deal, Chapter 3 provides profiles 80 airport operating companies and capital providers active in this market. Other chapters discuss likely near-term acquisition prospects, global aviation trends, and geopolitical issues of potential relevance to privatized airports.

I have a few nits to pick with the section on the United States, mostly matters of word choice or interpretation, but a few minor inaccuracies. One example is the attempt to privatize Niagara Falls (general aviation) airport, via a lease to Ferrovial Aeropuertos. It's true that this firm had been selected by the local airport authority in 2001, but the deal never came to fruition (as implied by the text). Also not accurate is the statement that Dubai Ports World "gained ownership of six U.S.[sea]ports that P&O controlled." That's how the popular press portrayed that controversial transaction, but that deal involved neither "ownership" nor "ports." Rather, it was a lease of individual terminals at the six ports in question.

Overall, though, this report is a great resource, one that I will keep on my shelf and refer to frequently. The bad news, though, is that it costs $1,750 for a PDF version or $1,950 in hard copy. If you'd like more information, including a detailed table of contents, contact Bentley at: djb@djbentley.fsbusiness.co.uk, referring to AP2008.

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TSA's Double Standard on Registered Traveler

Ever since Michael Levine and Richard Golaszewski first proposed the idea of Registered Traveler (originally called Trusted Traveler), I've been a fan of this idea on its original grounds as a way of devoting more security resources to higher-risk travelers by spending less on lower-risk ones. The concept was that people who were willing to be pre-cleared in advance (by submitting to a background check analogous to getting a security clearance) could get expedited processing at airports, as long as they could prove (biometrically) to be the person who had undergone the background check. This would not only save frequent flyers like me a bundle of time and hassles; it would also be an important step toward a more risk-based screening system, in which the Transportation Security Administration could shift resources from low-risk travelers to higher-risk travelers-a win-win proposition.

Researchers at places like Carnegie-Mellon University and RAND Corporation did studies to quantify the cost and time savings such a program would likely produce. And companies like Verified Identity Pass invested a lot of money to develop RT programs and get them approved by the TSA. But despite the great promise, RT members like me are still required to go through the same hassle at the checkpoint as everyone else; the only benefit is being able to skip the long lines waiting to have boarding passes matched to driver's licenses.

Earlier this year, in several interviews reported in this newsletter, TSA Administrator Kip Hawley explained that because his agency cannot be sure that "sleeper" terrorists won't qualify as RT members, all those previously vetted, card-carrying Registered Travelers must still schlep through the regular screening process. Hawley says, "It's not a security program but an ID program." But why is RT limited in this way?

It turns out that the fingerprint data collected by Clear and the other providers has been routinely turned over to the Transportation Security Clearinghouse (operated by the American Association of Airport Executives). This clearinghouse was set up following the 9/11 attacks to help airports get FBI criminal history checks done on the huge numbers of airport employees, contractors, and vendors who need access to secure areas at airports. The clearinghouse charges airports $27 per person, and the FBI apparently processes these background checks quickly and efficiently. An official at AAAE whom I interviewed last month told me that some 200,000 sets of fingerprints sent in by RT providers since the inception of the program have just sat there, because TSA has never given permission for them to be sent to the FBI for criminal history checks.

So let's get this straight. The TSA says RT cannot be a security program because it does not actually pre-clear RT members (via a criminal-history check). All TSA does is run RT applicants' names against its watch list-which would happen anyway whenever a member purchases a ticket. There is no criminal history check because TSA has refused to authorize one.

Now here comes the double standard. If TSA maintains that the FBI criminal history check is too limited to screen out potential sleeper terrorists, then why does it accept that very same ($27) criminal history check for several million airport workers? Those people typically enter secure areas without passing through a magnetometer and without having their possessions (such as tools) routinely X-rayed. Yet many of them have access to the ramp area where they could put weapons or bombs on board aircraft parked there.

With a new Administration taking over in January, there will be new leadership at the Department of Homeland Security and TSA. I hope one of their priorities will be to get serious about risk-based aviation security policies-such as getting back to the original concept for Registered Traveler.

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Do Airports Have "Market Power"?

Now that airports are more correctly being analyzed as businesses, the question of airports' monopoly-like "market power" is coming under increased scrutiny. In many metro areas, there is only one airport offering scheduled airline service. And in those larger metro areas with multiple airports, they are often owned and operated by the same entity (e.g., New York, Houston, London). It's not just airlines that worry about being charged above-market rates, as airports exploit their market power; economists and other analysts express the same concerns.

But the relationships between airports and airlines are often quite complex. One of the more interesting papers I've read on this issue was written for the Joint Transportation Research Center of the Organization for Economic Cooperation & Development (OECD) and the International Transport Forum (ITF). "Impacts of Airports on Airline Competition" is the work of Tae H. Oum of the University of British Columbia and Xiaowen Fu of Hong Kong Polytechnic University. It's paper No. 2008-17. (www.internationaltransportforum.org/jtrc/DiscussionPapers/jtrcpapers.html)

They note that because airports seek to increase their revenues from retail concessions, they have an interest in expanding passenger throughput, and that reduces their incentive to exploit their market power vis a vis the airlines. Airlines may not seek to expand as much at airports that cost them a lot more to operate at. But the airport/airline relationship will vary, depending on the airport's function (major connecting hub or not) and the composition of its airline tenants. An airport that serves as a fortress hub for a major airline has incentives to make that relationship work well-and that may have negative implications for significant entry by new airlines.

It is in this context that Oum and Fu discuss airport regulatory alternatives-primarily single-till price regulation, dual-till price regulation, rate of return regulation, and Australia/New Zealand style light-handed regulation. (These are all defined in the paper.) While the authors lean toward single-till price caps, they point out that "in the long run, airports under price cap regulation tend to under-invest in capacity expansion," which leads to congestion and reduced opportunities for competition via new-entrant airlines. They point out many other complexities that make airport regulation difficult, and suggest that in those metro areas fortunate enough to have multiple airports, it would be wise for them to be under separate ownership, so that competition between airports could serve to counteract airport market power. They note the positive implications for competition of the impending privatization (via long-term lease) of Chicago Midway and the upcoming divestiture by BAA (under regulatory pressure) of London Gatwick. They also note in passing the common ownership of the three major airports serving the New York metro area, though deigning to suggest breaking up that monopoly via a Midway-style long-term lease of one or more of those airports.

This is an insightful paper that will give anyone interested in airport regulatory issues useful food for thought. The two appendices also provide a handy overview of (1) the principal alternative forms of airport regulation and (2) the various forms of government and investor ownership of airports.

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Check Boarding Passes at the Gate?

For several years, aviation security critic Bruce Schneier has been criticizing TSA airport screening as "security theater." He has shown how to make a mockery of TSA watch lists by purchasing a ticket under a fake name (using, admittedly, somebody else's credit card-presumably stolen, if you are actually a terrorist), then make a copy of the boarding pass, altered to feature your real name. If you are on the TSA watch list, the fake name lets you escapes detection by the airline when you buy the ticket. And by forging your real name on the altered boarding pass, it matches your real driver's license at the only place they are matched-at the entrance to the security lines. Once through security, you throw away the altered boarding pass, then use the real one to board the plane. The loophole is that there is no matching of name and boarding pass at the gate.

This little scam received mass-market exposure in the November issue of The Atlantic, in an article called "The Things He Carried," by Jeffrey Goldberg. He and Schneier employed the phony boarding pass gambit at several airports, as well as getting past TSA screeners with liquids, box cutters, and other forbidden objects. Goldberg reports getting through security at O'Hare wearing a "Beerbelly," a neoprene accessory for sports events that is worn under your shirt and holds up to 80 oz. of liquid, complete with drinking tube. (He reports carrying only two cans' worth of Bud Light.)

After reporting a number of such ploys, Goldberg then recounts a visit with TSA Administrator Kip Hawley, where he questioned Hawley about the boarding pass loophole in particular. After some double-talk, Hawley told Goldberg that boarding passes will eventually be encrypted, so that TSA can follow their progress from printer to gate. I'm not clear how that's supposed to work with print-at-home boarding passes, but the idea of having a final check at the gate is a good one, if the watch list is to accomplish its purpose of ensuring that high-risk travelers get extra scrutiny and really bad guys don't get to fly at all.

I will note in passing that the only airport I've used that does security at the gate is Vienna (at least for international departures). Screening staff apparently move from gate to gate, depending on flight departure times. That means if you get to the gate very early, you're stuck waiting a long time for security to open up. But the airport apparently expects you to spend that time at the retail shops which are all over the place, a few steps from every gate, rather than just standing in line.

It would be more passenger-friendly (and I suspect, less costly) to retain centralized screening checkpoints, but require boarding pass/driver's license matching at the gate, as part of the boarding process.

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Terminal Bomb Scanner in Testing

One of the points Schneier (see above) and I have both made for years is that large concentrations of people in airport ticket lobbies (especially around lobby-based explosives detection machines) and at screening checkpoints are obvious targets for suicide bombers. Yet apart from the occasional roving law enforcement officer, nothing appears to have been done to detect people wearing explosives under their clothing.

The TSA has recently tested a scanner at the Denver and Minneapolis/St. Paul airports aimed squarely at this problem. As reported by Thomas Frank in USA Today (Oct. 6, 2008), the scanner detects infrared (heat energy) emitted from the human body, at a distance up to 30 feet. It looks for cold spots, where dense objects block the usual pattern of body heat. Made by British company QinetiQ North America, the $210,000 device is mounted on a tripod at a busy location. It does not emit energy (such as X-rays), nor does it produce images. Instead, it simply sounds an alarm, at which point a screener stops the person for questioning.

This may or may not be a workable technology, but I'm glad to see the TSA finally attempting to deal with the suicide-bomber threat at airport terminals. This is also something that might be usable at transit stations and other places where there are large concentrations of people.

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News Notes

RT Without the Fuss. Privatized Luton Airport near London has decided to offer the functional equivalent of the non-risk-based U.S. Registered Traveler program-without the signup and ID card routine. Instead, travelers can purchase a ticket to use priority checkpoint lanes, from kiosks in the terminal or online, from home or office. The priority lane is due to be in operation by year-end.

New Airport Revenue Source: Natural Gas. The Allegheny Airport Authority in September authorized Pittsburgh International Airport and the county's general aviation airport to solicit bids for natural gas drilling. The decision is subject to approval by the County Council, which owns the land on which the airports are located.

Separate Checkpoints for Cockpit Crew. The TSA and Southwest Airlines cooperated this fall on a 60-day pilot project at Baltimore-Washington International, using a biometric kiosk for cockpit crew. By matching fingerprints and a stored photo, the system is intended to identify pilots and first officers, allowing them to avoid going through the regular checkpoint screening. The kiosk is located in the exit lane of the secure area near baggage claim. The process takes only five seconds. Similar pilot programs (called crewPASS) have been in operation at two other airports.

Commercial Flights from GA Airport. An alternative to busy SEATAC airport may soon exist for Puget Sound area residents. The city council of Everett, about 25 miles north of Seattle, voted unanimously to permit Horizon Air to begin commercial flights at Paine Field. The airline plans service to Portland and Spokane, using 76-seat Bombardier Q400 aircraft, starting next spring. Several previous attempts to launch commercial service from GA airports, in other parts of the country, have faced vigorous public opposition.

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Quotable Quotes

"Morrison and Winston (2000) . . . among others, found empirical evidence that a dominant airline's control over key airport facilities, such as slots and gates, is likely to impose significant entry barriers to other potential competitors. Gonec and Nicoletti (2000) studied 102 air routes connecting 14 major international airports. They found in a large number of international airports congestion phenomena are reported to exist, and a single airline controls more than half of the available slots. This implies that dominant carriers are frequently in a position to use slot dominance at congested airports to close out competitors or raise costs for rivals on certain routes. As a result, few international routes are truly open to competition."
--Tae Oum and Xiaowen Fu, "Impacts of Airports on Airline Competition," OECD/ITF Joint Transport Research Centre Discussion Paper No. 2008-17

"Competition officials in Brussels have long been pursuing two loss-making airlines, Alitalia and Olympic, over illegal subsidies. Both are tragedies born of patronage on an epic scale. For years, decisions about hubs and route maps have been dictated by politicians and trade unions trying to preserve local fiefs. Their payrolls have been bloated by the appointment of mistresses of the powerful, their in-laws, and idiot nephews. Privatisation and restructuring now await these flag-carriers."
--Charlemagne, "Europe's Baleful Bail-Outs," The Economist, Nov. 1, 2008

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Airport Policy and Security Newsletter #39

bob.poole@reason.org (Robert Poole) — Wed, 01 Oct 2008 00:00:00 EDT

In this issue:

New tool for managing the airside
Protecting airports and airliners from missile attacks
Runway pricing gains support
TSA overkill on business jets
First Midway, now three others
News Notes
Quotable Quotes

New Tool for Airport Surface Management

We hear a lot about how the future NextGen ATC system will provide the same, real-time information to all key participants in the system, from pilots to controllers to airline and airport operations people. An early example of such a capability is now deployed at several U.S. and overseas airports. As an enhancement to ASDE-X (airport surface detection system), Sensis Corp. has developed something called Aerobahn. It's a web-based information system that fuses real-time flight operations data and airport surveillance data (from radar and transponders), sharing this information among all key participants via the Internet.

The system has three principal uses. It can display a real-time picture of where aircraft are on the airport, including gate areas as well as runways and taxiways. It can be programmed to give alerts when various thresholds are reached-e.g., the length of a taxiway queue. And it can provide historical data for purpose of analysis-such as, to do a post-mortem on how a snowstorm was handled.

Over the past year, several airlines have signed up for Aerobahn to better manage their terminal operations at ASDE-X equipped airports-for example, Continental at Houston and Newark, as well as Northwest at Detroit and Minneapolis/St. Paul. (Overseas users include Fraport for Frankfurt Airport, French ATC provider SNA for Paris Orly and de Gaulle, and the Civil Aviation Department for Hong Kong International.) Those overseas operations are for the entire airport in each case, rather than to serve a particular airline. But serving entire airports is now coming to the United States, too.

In September, Sensis announced a one-year contract with DOT's Volpe Center to provide Aerobahn to the FAA at New York's JFK International Airport. Sensis hopes that airlines serving JFK will also sign on, and Delta was the first to do so. The FAA intends to use the real-time data to identify new policies and procedures for JFK that could reduce taxi times, save fuel, and reduce emissions-the same kinds of benefits that have attracted individual airlines to use the system.

Aerobahn depends for much of its data on ASDE-X, which is being installed at 35 U.S. airports, primarily to reduce runway incursions. The FAA is also planning to contract with one or more companies to test smaller, less-costly airport surveillance systems that could be installed at small to medium-size airports, also primarily to reduce runway incursions. The other missing piece in providing comprehensive airport surveillance is getting transponders onto all ground vehicles. Doing that would provide comprehensive identification of all vehicles, not just aircraft, at ASDE-X/Aerobahn airports. And this approach could also be integrated with a lower-cost multilateration system at smaller and medium-size airports. One approach for doing that was set forth in "Reducing Runway Incursions-A Simple, Yet Effective Next Step," in the Summer 2008 issue of The Journal of Air Traffic Control. (www.atca.org/journal.aspx)

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Addressing the MANPADS Threat, Continued

What's a cost-effective way to deal with the alleged threat of man-portable air defense systems (MANPADS)? The conventional wisdom in Congress for a time was to mandate that every airliner in American be equipped with a million-dollar system to detect and deflect such missiles-an approach that appears wildly out of proportion to the threat. Fortunately, instead of mandating this brute-force approach, Congress agreed that the Dept. of Homeland Security should test it, along with alternative approaches.

We haven't heard much recently about the DHS's 15-month test of Northrop Grumman's anti-missile system on 11 Fedex MD-11s in operational service, which ended in March. The Fedex planes flew 4,500 "sorties" to 51 different airports carrying the 500-lb. Guardian pod. Airlines certainly hope the results will show that the system is too costly to purchase and fly with-but so far DHS has not released any results.

What we have seen recently is information about an alternative approach, being tested under Project CHLOE. This concept involves protecting the airspace above and around airports, via a long-endurance, high-altitude unmanned aerial vehicle (UAV) carrying either just a detection device (linked to ground-based interception or spoofing devices) or combining both detection and countermeasures on the UAV. Last month the Scaled Composites White Knight One aircraft began test flights of the Northrop Grumman Guardian pod as a precursor of tests against threats set to begin this month. (http://mojaveskies.blogspot.com/2008/08/whiteknightone-tests-project-chloe-pod.html)

Considering the physics of the situation, it seems plausible to me that one or more UAV-mounted systems operating at the planned 65,000 feet could scan the needed three-mile radius around a large airport, plus approach and departure corridors (where airliners are most vulnerable, given their low altitudes during takeoffs and landings). However, effective countermeasures from that altitude may be far more difficult, suggesting that a combination of airborne sensor and ground-based interdiction (e.g., Raytheon's proposed Vigilant Eagle) may well be more feasible.

I still think the most cost-effective approach is the current effort to seek out and destroy errant MANPADS, run primarily by the State Department, which claims to have destroyed 26,000 of these nasty weapons since 2002. As reported by David Hughes in Aviation Week (July 28, 2008), the program's director, Lincoln Bloomfield, estimates that 50,000 more of the weapons are "in nations where stewardship falls short of what is needed to keep them out of the wrong hands." He also says that in nations where terrorists are most likely to purchase them, the authorities usually want money in return for destroying them. That's all right with me, if the cost turns out to be far less than the tens of billions of dollars it would take to equip and operate anti-missile devices on the entire U.S. airliner fleet. And sometimes all it takes is a team of skilled people to help governments do the destruction work. State and Homeland Security have a group of 20 peo ple who operate in two-person teams to help other countries assess and deal with their MANPADS situation.

Countering MANPADS could have been another case of legislate first, analyze later. Fortunately, in this case Congress wisely called for research on alternatives.

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Runway Congestion Pricing Picks Up Support

Although airport and airline groups have both criticized the U.S. DOT's proposal to auction off a portion of the slots at the major New York airports, the picture is quite different when it comes to airports being able to price the use of their runways. When the Air Transport Association filed a legal challenge to the revised DOT airport rates and charges policy (which would allow congestion pricing), the Airports Council International-North America condemned the ATA's position. "DOT recognized that airport proprietors are in the best position to manage the use of the facilities they planned, financed, built, and currently operate," the organization said in a statement. "Airports can work with airlines and the local community to develop rates and charges that address airline overscheduling, congestion, and passenger inconvenience."

Individual airport officials have begun speaking out in defense of runway pricing. In a roundtable discussion in the August/September 2008 issue of Airport Magazine, Tom Kinton, CEO of Massport (operator of Boston Logan Airport) called congestion pricing one of the "tools in the toolbox" to help with capacity problems. He was seconded in that viewpoint by Calvin Davenger, Jr., deputy director of aviation at Philadelphia International Airport.

But the heaviest hitter to weigh in on this issue in recent weeks was Alfred Kahn, the father of airline deregulation. The 91-year-old Kahn got a standing ovation for his keynote speech at the ACI World Conference in Boston Sept. 22nd. (A tape of the speech is available online at www.aci-na.org/boston-beacon/monday/9-2-08_kahn.html.) When demand exceeds capacity, he told attendees, takeoff and landing prices should go up accordingly. He told Benet Wilson of Aviation Daily that charging for runway use based on aircraft weight "doesn't reflect the congestion problem. On the contrary, it discourages landings by heavy aircraft with large capacity and encourages the use of smaller planes." And he recounted that "A book I wrote back in 1971 on pricing said then that the industry needs to vary charges based on use. Delays cost billions of dollars a year in time and wasted fuel." More than 2,000 delegates from 154 airports and 369 companies in 49 countries took part in the conference.

It's not clear whether the DOT's slot auction proposal for New York will survive legal challenges; the legal evidence looks mixed to me (as a non-attorney). But I think DOT is on solid legal ground in clarifying the long-standing ability of airports to use something other than aircraft weight as the basis for runway charges. Let's hope the Court of Appeals agrees.

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Proposed TSA Bizjet Security Regime Looks Like Overkill

Ever since the TSA was created by Congress in 2001 to inspect airline passengers and their baggage (in hopes of preventing another 9/11 attack by converting an aircraft into a guided missile), some critics have been calling for similar security measures to be applied to non-airline aircraft-or at least the larger ones. Now those critics seem about to get their way, if the TSA's proposed Large Aircraft Security Program goes into effect next year.

"Large" in this case is defined as a maximum takeoff weight of 12,500 lbs. or more-which in practice means nearly all business jets and many turboprops-an estimated 10-12,000 aircraft. Passengers on those flights would have to be checked against the same watch lists used for airline passengers, and the flight crews would have to be fingerprinted and pass a criminal history background check in order to keep flying. (Apparently, such regulations already apply to companies providing air charter services, which I did not know.) In addition, operators of these jets and turboprops would have to contract with TSA-approved auditors to demonstrate their compliance with the TSA regulations.

What's a sensible person to make of all this? If you believe that the whole passenger and baggage screening program applied to airlines makes sense as a cost-effective response to the terrorist threat (as do most members of Congress), then this new program could be seen as merely being consistent ("closing a loophole," as those legislators would put it). After all, business jets include luxury private versions of 737s and A320s (and even the occasional 767 and 747), and if the bad guys got hold of one of those and flew it into a building, it could produce just as much destruction as the planes on 9/11. Smaller bizjets don't carry anywhere near the fuel load, but conceivably could be packed full of explosives to make a bigger bang.

But as others have pointed out, you could make just as big a bang by driving an explosives-laden van into the parking garage under numerous tall buildings. And for all the TSA's emphasis on background checks and fingerprinting for U.S. flight crews, the proposal does not call for doing likewise for foreign bizjet crews. How consistent is that? What this sounds like is not a carefully thought-out attempt to close a genuine loophole, but an effort to regulate what TSA can (U.S. crews and planes but not trucks) because it will play well with the poorly informed-in the media and in Congress.

What the next Administration really should do is to revisit the whole non-risk-based approach to aviation security that was mandated by Congress in its post-9/11 panic. That would mean rethinking 100% checked-baggage screening as well as the proposed new "large aircraft" regulations.

Note: If you wish to post comments on the proposed TSA large aircraft regulations, the Docket Number is TSA-2008-0021. Go to www.regulations.gov and follow the online instructions, using this docket number.

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Midway Inspires Other Lease Proposals

Just a week after the City of Chicago selected the winning bid of $2.5 billion for a 99-year lease of Midway Airport, the City Council voted unanimously to approve the deal. It now goes to the FAA as the city's final application under the Airport Privatization Pilot Program, with approval expected to take 60 days or so. That would permit a financial closing by year-end. Financial people I've talked to expect the portion of the $2.5 billion accounted for by debt (typically two-thirds or more) to be much smaller than usual, given the turmoil in the debt markets. Once that settles down, the winning consortium would very likely refinance.

In previous issues I have noted expressions of interest in doing likewise from public officials in Austin and Milwaukee. That interest still exists, though neither one has a political consensus in favor of privatization at this point. A third possible contender, New Orleans Louis Armstrong International, surfaced in recent weeks. All three airports are classified by the FAA as medium hubs, which is relevant because the Pilot Program allows only one of its five slots to be taken by a large hub, which Midway is. (One slot is reserved for a general aviation airport.) With city, county, and state governments heading into deep fiscal waters, more airports might be put into play in the coming months, competing for the three remaining commercial airport slots.

With respect to Austin, insiders I've talked with tell me discussions between public officials and private sector parties have continued this year, after the big flurry of public discussion in the first half of 2007. The only news item I could find via a Google search was that the Austin Airport Advisory Commission has a briefing on airport privatization on May 13, 2008. Other than that, mum's the word on the continuing discussions.

The Milwaukee airport privatization idea favored by County Executive Scott Walker has become a political issue. On Oct.9, 2008 a County Board committee voted down Walker's proposal for a $500,000 consultant study on the issue. Committee members asked "What's the rush?" to which Walker replied that there might be more airports seeking slots than there were FAA slots available. And Budget Director Steven Kreklow said the study was needed because of the legal and financial complexities of leasing the airport, and the county's desire not to have to depend only on information provided by prospective bidders. The issue has also been caught up in squabbles over where to get the funding to bail out the county's ailing bus transit system.

In the case of New Orleans, the push is coming from the business community, along with Mayor Ray Nagin. The city and the airport are still recovering from 2005's Hurricane Katrina, and the idea that a long-term lease could generate hundreds of millions of dollars to help redevelop key areas of the city is attractive. Prior to privatization coming onto the radar screen, the idea of the state acquiring Louis Armstrong International Airport (and paying handsomely for the privilege) was under consideration, and a Regional Airport Authority has just been created to explore that approach. But in early October the city's Aviation Board began developing a request for qualifications for consultants to estimate the airport's value if leased. Several city council members have spoken out in favor of considering privatization, especially if that would let the city retain ownership, rather than having the airport transferred to a state-designated airport authority.

As of now, my guess is that New Orleans will be the first of the three to file a preliminary application with the FAA. Once the state and municipal fiscal crunch really sinks in, I expect there will be others.

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News Notes

New Study Relates Airport Efficiency, Privatization. An international statistical study looked at whether ownership form affects the cost-efficiency of airports. Key findings include: majority private ownership works better than majority government ownership; US airports operated by port authorities would be more efficient if operated by independent airport authorities; and privatization of one or more airports in cities with multiple airports would improve the efficiency of all of them. "Ownership Forms Matter for Airport Efficiency" by Tae-Hoon Oum, Jia Yan, and Chunyan Yu is forthcoming in the Journal of Urban Economics.

Automating Aircraft Terminal Docking. A function long performed manually at U.S. airports-guiding an airliner into place at its jetway, typically by a ramp worker waving orange wands-is being automated at Dallas/Ft. Worth Airport. Safedock uses laser guidance to let pilots self-park at their assigned gate. Putting in the system was motivated by delays due to FAA safety rules that prevent workers from being on the ramp during lightning events (which are common at DFW during the summer). That policy often left airliners sitting on the ramp near the jetway but unable to dock, until the lightning conditions passed, playing havoc with schedules and passenger convenience. As of October, Safedock is in place and operational at 81 gates at Terminals A, C, and D serving American Airlines. American Eagle and United have expressed interest in getting it installed at another 72 gates in Terminals B and E.

Registered Traveler Updates. Although the TSA has required RT providers to make their systems interoperable, specific arrangements had not been in place until recently. But in September, Clear and Vigilant signed a reciprocal fee agreement that provides for each to pay the other an interoperability cost-sharing fee whenever it processes a passenger belonging to the other program. Thus far, the third provider, FLO, has not worked out similar deals. Meanwhile, Clear announced a significant rate increase. Effective Oct. 14, 2008, annual membership goes from $128 to $199. As of October 1st, Clear had 210,000 members. The most recent airport to open Clear lanes is Atlanta's Hartsfield-Jackson.

Easing of Liquid Rules in Sight. New two-dimensional X-ray systems at passenger checkpoints may soon (i.e., next year) make it possible to scrap the current U.S. and European requirements that liquids be limited to 3-oz. containers and placed in a plastic bag that must be removed from carry-on bags. The travel newsletter Tripso reported in September that the U.K. government is running tests to see if the new scanners' software can distinguish between harmful and harmless liquids (based on their molecular structure). If so, the current requirements could be scrapped for all U.K. airports equipped with the new 2-D X-rays (as are all of BAA's airports). And in a Wall Street Journal article on October 3rd, Scott McCartney reports an interview with TSA Administrator Kip Hawley in which the latter said that the machines' software to distinguish harmful liquids has worked in laboratories and is being readied for deployment to the nearly 1,000 2-D machines that will be in place by sometime next year at U.S. airports. TSA is also discussing the issue with European Union officials, so that all can agree on a common standard.

More Low-Cost Terminals in the Works. Two more no-frills (bare-bones) terminals aimed at low-cost carriers are in prospect. Privatized Copenhagen Airport has announced plans for a $36 million "CHP Swift" terminal, to begin construction next year and open in mid-2010. It will have an initial capacity of 6 million annual passengers and will be designed for a 30-minute aircraft turnaround. Air Asia, a low-cost carrier based in Singapore, is negotiating with state-owned Malaysia Airports Holdings Berhad for a no-frills terminal at Kuching Airport in Sarawak. Aviation Daily reported (Oct. 10th) that "a deal seems to have been brokered" to accomplish this.

Reason Anniversary Celebration. Reason magazine, the flagship publication of Reason Foundation, celebrates its 40th anniversary this year, with a gala event in Los Angeles, Nov. 14-15. "Reason Goes Hollywood" takes place at the historic and glamorous Hollywood Roosevelt Hotel and includes both a conference and a black tie banquet. Details are at www.reason.org/events. Hope to see you there!

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Quotable Quotes

"ACI [Airports Council International] has decided that it is the appropriate body to make standards relevant to airports. There are two things of interest in that: first, that ACI now thinks it has the weight, membership numbers, and gravitas to make standards that will actually become standard; and secondly, that it is moving into what was previously thought to be IATA's role. This is evidence of the growing commercial heft of the airports, which see themselves as an important and freestanding part of the air transport industry. The number of members continues to grow, and to be increasingly aggressive about asserting their rights. Standards are really the logical next step."
--Andrew Charlton, Aviation Intelligence Reporter, October 2008 (www.aviationadvocacy.aero)

"In the days following 9/11, you had a sense of what a terrorist looked like. All the frequent flyers were saying, we know we're not terrorists, so they said they should be able to go through more quickly. It has a very appealing logic to it, but the terrorists have figured out-beyond a shadow of a doubt-that they want to use Western operatives who have no distinguishing characteristics from anyone else who is a business traveler. All the things you can do on a quick background check, you can easily defeat with what we call a clean skin . . . . We don't want to give a free pass to somebody who could do us harm. That was the philosophical problem [with the original concept of Registered Traveler]. It was more a changing enemy than a changing position. We felt the Registered Traveler community was doing a good job on the ID piece. We wanted to recognize that work with the ID, but we didn't want to false advertise to the American public that we'll do this miniature threat assessment-which was absolutely not a background check, not a criminal history check-it was just 'Are you not on the watch list?' . . . . It's not a security program but an ID program."
--Kip Hawley, TSA Administrator, Business Travel News, Oct. 20, 2008.

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Airport Policy and Security Newsletter #38

bob.poole@reason.org (Robert Poole) — Mon, 01 Sep 2008 00:00:00 EDT

In this issue:

TSA faulted on covert testing
Breaking up BAA
Will Secure Flight resolve watch list problems?
New York airport pricing battle update
Airport privatization continues, despite Fitch's negativity
Phoenix-Gateway tries new funding approach
News Notes

TSA Faulted on Covert Testing

Last month the Government Accountability Office issued a detailed assessment of the covert testing of airport security carried out by the Transportation Security Administration. ("Transportation Security: TSA Has Developed a Risk-Based Covert Testing Program, but Could Better Mitigate Aviation Security Vulnerabilities Identified Through Covert Tests," GAO-08-958) Most of the media coverage has focused on the main conclusion represented by the report's title: although TSA has a pretty serious (and risk-based) national program of covert testing of airport passenger and baggage screening as well as access and perimeter control, it is not systematically using the results to address identified problems. Rep. Bennie Thompson (D, MS), who chairs the House Homeland Security Committee, has called a hearing for this month to discuss GAO's findings.

In a USA Today article about the report (Aug. 14th), TSA's Ellen Howe responded that the covert testing has led to the development of new technologies, such as body-scanning equipment and two-dimensional X-ray systems at passenger checkpoints. This basically admits what other critics and I have been saying about TSA's first-generation passenger and bag screening. It was mostly window-dressing that could stop most amateurs but not anyone seriously committed to bringing weapons or some types of explosives onto planes.

But the GAO report also raises a broader point. Covert testing is supposed to be being used in all modes of transportation, but as of now it isn't. The legislation creating TSA (the Aviation & Transportation Security Act of 2001) called for TSA to protect all modes of transportation. The 2002 National Strategy for Homeland Security called for covert "red team" testing of all critical infrastructure, including all modes of transportation. In 2004, the 9/11 Commission said the government should identify transportation assets that need protection, set risk-based priorities for defending them, and select the most cost-effective ways of doing so. The "Implementing Recommendations of the 9/11 Commission Act of 2007"specifically requires DHS (TSA's parent agency) to develop and implement a railroad security strategy. And the explanatory statement for the DHS appropriations act of 2008 "directs TSA to be more proactive [in] red teaming for all modes o f transportation," reports GAO.

If you go to the TSA website, you can download a Transportation Systems Sector Specific Plan (TS-SSP) that outlines a framework for coordinating security efforts in six major modes of transportation (aviation, freight rail, highway, maritime, mass transit, and pipeline). You can click on a sector-specific plan for each mode, but they look to me to be mostly bureaucratese. Beyond some nice rhetoric in the TS-SSP Base Plan about risk assessment, which would imply making priority decisions across modes, everything seems to devolve quickly to the individual modes. There doesn't seem to be any place to ask and answer such questions as:

Does it really make sense to devote the vast majority of transportation security spending to airport passenger and baggage screening, when the other modes are largely unprotected?
Would doubling spending on terrorist intelligence work be more effective than spending that increment on current airport (or port or pipeline) security?

As for covert testing in the other transportation modes, all that GAO could identify were three one-time TSA pilot programs-in mass transit, passenger rail, and maritime ferry operations.

I continue to be a big advocate of risk-based approaches to all aspects of security. There will always be limited dollars, and it makes sense to continually assess the threats and decide where we will get the most bang for the buck. But we are still suffering from Congress's over-reaction to 9/11, by embedding in the law the current huge over-emphasis on airport passenger and bag screening. Until that mandate can be rethought, a seriously risk-based approach to transportation security will not be possible.

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Breaking Up BAA

Last month the U.K. Competition Commission issued its preliminary report on BAA, the privatized operator of the major airports serving London and Scotland. It recommended that BAA be required to sell two of the three London airports and one of its two Scottish ones. The rationale is that competition would work better than regulation in improving service to airlines and passengers.

BAA, formerly the British Airports Authority, was the world's first significant airport privatization. In 1987, the Thatcher government sold 100% of the company on the stock market, for $2.5 billion. It was widely believed that the government chose to sell BAA as a single entity because the sale of a near-monopoly airport system would be worth more than what it could get by selling the airports individually. Also, nobody really knew what airports were worth, since nobody had privatized airports before that. BAA's publicly traded market value zoomed to $4 billion by 1990, and by 2006, when Ferrovial bought up BAA, it paid nearly $19 billion.

BAA's Heathrow, Gatwick, and Stansted handle 90% of the air passengers in London, and its Edinburgh and Glasgow airports handle 84% of Scotland's. Passengers and many airlines (especially low-cost carriers) have complained for years about overcrowded terminals and lack of sufficient runway capacity, and the Competition Commission seconded those complaints. In its defense, BAA cites factors largely beyond its control-such as the long, convoluted planning process required to get permission for any major terminal or runway additions, as well as costly airport security requirements imposed on short notice by the government. Still, it's easy to imagine that three major London airports under separate ownership might be more creative and aggressive in figuring out how to mitigate externalities associated with expansion projects. The Economist, for example, points out that adding another runway should be far less problematic at Gatwick than at Heathrow, and a two-runway Gatwick could position itself as a second hub for the region (much as both Newark and JFK both serve as hubs for greater New York).

I'm inclined to agree with the arguments for competition. Indeed, at the time the Thatcher government made the decision to privatize BAA, I agreed with the three think tank reports (from the Adam Smith Institute, the Centre for Policy Studies, and the Institute for Fiscal Studies), all of which argued for competitive divestiture of BAA's airports. After 20 years, it's somewhat late to be correcting this mistake, but since there would likely be important benefits to doing so, better late than never.

The Economist last spring (March 29, 2008) also suggested that, with real competition among London airports, the government's current price-cap regulation might be done away with. In that case, since business-oriented airlines much prefer Heathrow, landing charges there would rise "to reflect the value and scarcity of its capacity." That would shift more leisure travelers to Gatwick, Stansted, and Luton, increasing their market share. Should demand at Heathrow still remain high enough to justify an additional runway, the increased revenue might permit greater scope to buy out impacted neighborhoods.

A number of global airport companies have expressed interest in buying whichever BAA airports may be offered for sale. But this is all still preliminary. The Competition Commission's final report will be released in March or April, after which BAA may appeal. Meanwhile, BAA completed a $25 billion debt refinancing in August, secured by the assets of the three London airports and its Heathrow Express train. That huge financing, in today's markets, is a vote of confidence in the value of the airports, whoever ends up owning them.

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More Watch List Troubles: Where Is Secure Flight?

We're seeing yet another spate of news stories bemoaning the fate of people whose name is similar to a name on the watch list provided by TSA to the airlines. The airlines use these lists to identify passengers who require secondary screening or who are on the no-fly list. People thus flagged have to stand in line at the ticket counter, so an airline person can see and talk to them, to ascertain whether their name really matches a name on the list, and even then, sometimes they can't be sure.This is a problem that should have been resolved years ago, but persistent objections by various interest groups have kept the solution in a perpetual state of redesign. That solution is called Secure Flight, and it would relieve the airlines of this chore, which would be done for them, more accurately, by the TSA itself.

The problem dates back to before 9/11. In those days, airlines had all adopted, at FAA urging, an anti-bomb measure called CAPPS (Computer Assisted Passenger Prescreening Sysem). It was applied only to passengers who checked luggage, and identified those whose checked luggage would be screened, based on various criteria. After 9/11, CAPPS was modified and applied to all passengers, with some selected for secondary screening based on certain parameters (like paying cash, buying a one-way ticket, etc.) and others selected at random for secondary screening. In addition, any passenger who was found to be on the "no-fly" list was to be prevented from boarding the plane, and his/her luggage prevented from being loaded.

The problems with CAPPS were widely understood. In addition to the selectee parameters becoming known, it put a burden on the airlines to match every passenger name record to names on lists provided to them by the TSA-and those lists were often not up-to-date and contained many possible version of suspicious people's names. TSA originally proposed a CAPPS II that would have used data mining to sort travelers and assign them risk scores, but that raised huge privacy and civil liberties objections. That sent the whole project back to the drawing board, to emerge in concept as Secure Flight. Yet all this time, the old CAPPS has remained in place, with all its shortcomings. It is the source of all the "false positives" where innocent people are flagged either for secondary screening or to be denied boarding.

The simplified Secure Flight replacement would not do data mining, but it would take the burden of name-matching off the airlines and greatly reduce the chances of people erroneously being flagged for secondary screening. How? By using gender and date of birth to weed out nearly all of the false positives. But how would TSA get that additional information? Airlines and travel agents would have to ask for it, as part of the reservations process. Yet this, too, raised privacy concerns with some groups-as if this information were not already required for credit card applications, drivers' licenses, and countless other minutiae of daily life! But even the airline and travel agent trade groups, ATA and ASTA, last year filed written objections to being required to ask passengers for this information.

According to a recent post (Aug. 6, 2008) on pajamasmedia.com by DHS Assistant Secretary for Policy Stewart Baker, a few of the airlines don't want to modify their legacy software to include new information like date of birth (though he points out that Southwest has done so, and "has one of the industry's best systems for minimizing false positives"). Meanwhile, many passengers continue to be mis-identified by these obsolete systems.

A year ago TSA issued a Notice of Proposed Rule Making for the final version of Secure Flight, and in April of this year Administrator Kip Hawley said the program will start being implemented next January. But in July Hawley told Aviation Week that while they still hope to begin the roll-out in January, "How fast you implement it is up to the airlines." He said he hopes the new system will be a competitive advantage and marketing tool for airlines that are early adopters.

I, for one, think it's high time airlines and travel agents got with the program.

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New York Airport Pricing Battle Continues

In our last episode, the US DOT had announced its plan to gradually auction off a modest number of slots currently used by airlines the three major New York area airports (JFK, LGA, and EWR); the Air Transport Association had threatened to file suit; and Sen. Charles Schumer (D, NY) had introduced legislation to prevent the DOT from imposing any form of pricing or auction at any airport.

Since then, a number of shoes have dropped. In early August, DOT followed up with what should have been a less-controversial plan: to auction off a pair of surplus slots at Newark that became available when Eos went bankrupt earlier this year. ATA made good on its anti-auction-authority lawsuit, which it filed four days later. Two weeks after that, the FAA posted procedures for the Sept. 3 Eos slot auction on its web site, but the next day announced that the effort was on hold due to the ATA litigation (which might well have led to nobody submitting bids). The Port Authority meanwhile mobilized its troops, leading to an announcement August 20th that both New York Gov. David Paterson and New Jersey Gov. Jon Corzine were opposed to the auction plan. New York Mayor Bloomberg, however, had endorsed the plan the week before. Also favoring the auction proposals were editorials in the Wall Street Journal and USA Today.

But what I thought was the most outrageous action was the Port Authority's announcement on August 4th that it would deny permission to operate at JFK, LGA, or EWR to any flight operating pursuant to a federal slot auction. DOT general counsel D.J. Gribbin responded that an airport cannot legally discriminate against flights, just because it disagrees with a federal policy. And DOT followed up, correctly, by threatening to withhold federal Airport Improvement Program (AIP) funding. Airports receiving such funding sign 20-year grant agreements for each new batch of money, under which they commit to a whole raft of provisions about how they will operate their airports-including that they will serve all airlines on a non-discriminatory basis. In response to that, the Port Authority joined the ATA lawsuit against the auctions.

Only one ray of hope appeared in all this battling. In a story that I saw only in the New York Sun (Aug. 15, 2008), Port Authority chairman Anthony Coscia suggested that if the DOT were to give priority in NextGen type capacity enhancements to the highly congested New York region, the PA would be more cooperative. "To the extent that the FAA and the DOT begin to turn their policy drive more toward expanding capacity and, yes, making significant investments in a next-generation air traffic control system and changes of that nature, it would show a great deal more flexibility in terms of what we think our appropriate operational measures are in the interim," he said at a board meeting. The paper quoted DOT's Gribbin as being pleased by Coscia's comments. "It is very encouraging. We have worked closely with the Port Authority in the past, and I can't see why we can't agree on a common approach." He said the whole point of auctions was to generate proceeds to build an upgraded infrastructure at the participating airports.

Let me suggest a win-win opportunity here. While DOT's legal ability to impose auctions is unclear, the Port Authority's legal ability to adopt runway congestion pricing has recently been bolstered by DOT's revised airport rates and charges policy. If the PA would agree to adopt runway pricing, to reduce congestion in the near-term, with all proceeds dedicated to airport capacity expansion, the FAA could agree to make self-help congested airports like the PA airports first in line for NextGen upgrades. For details on how such a plan might work, go to www.reason.org/ps366.pdf.

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Airport Privatization Continues, Fitch Notwithstanding

I've fielded several media calls regarding a Fitch Ratings report earlier this month revising its outlook for U.S. airports from stable to negative. The report focused mostly on the near-term, citing higher fuel prices and a sagging economy as causes of reduced enplanements. "While many [U.S.] airports have seen reductions of as much as 8% in the first and second quarters of 2008, many could well see further declines." Longer term, if the underlying pressures continue for several years, there may be more fundamental changes in airline pricing that could lead to larger reductions, especially in low-fare passengers.

Despite this gloominess, the airport privatization trend shows no sign of flagging. In Reason's Annual Privatization Report 2008 (a major report produced every year), I wrote the section on airports and air traffic control, and as you will see if you read it, the past year has been very active in airport privatization. (www.reason.org/apr2008/air_transportation.pdf)

That chapter was written in April and May. Since then, there has been no let-up. Last month Spain's government announced that it will sell an initial 30% stake in state-owned airport operator AENA, which operates most of the country's important airports. A cabinet minister estimated the economic value of AENA at $46.7 billion. A week later South Korea's government said it would offer a 49% stake in Incheon International Airport. The government hopes to secure a strategic tie-up with a global airport operator.

Several existing airport companies have restructured some of their holdings recently. Macquarie Airports last month announced the sale of nearly a billion dollars worth of assets, including a 27% stake in Copenhagen Airports and 26% of Brussels Airport. In addition to a share buyback, Macquarie Airports is using the proceeds to purchase a 5.6% stake in ASUR, one of three privatized Mexican airport operators. And Spain's Ferrovial, parent company of BAA, sold Belfast City Airport to Amro Global Infrastructure Fund. The point here is not just that some companies are selling but that others are eagerly buying.

Germany's privatized Fraport, after initial success as part of the team that is modernizing New Delhi's Indira Gandhi Airport, announced the opening of a permanent office in India, to pursue additional business opportunities. And in Russia, companies are queuing up to bid on a $1.3 billion, 30-year concession to develop and operate St. Petersburg's Pulkovo International Airport.

Back in the USA, this summer the City of Chicago eliminated two of the six teams that had submitted qualifications to lease Midway Airport-Abertis/Babcock & Brown and Carlyle Infrastructure Partners. With Macquarie's subsequent decision to withdraw, that leaves three teams still in the running for Midway: Hochtief/Goldman Sachs, YVR/Citi Infrastructure, and Morgan Stanley/Aeroports de Paris. My sources tell me of interest in several other cities in being the next participants in the Airport Privatization Pilot Program, including Austin, Milwaukee, and New Orleans.

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Another New Approach to Small Airport Funding

In issue No. 36, I described an agreement between Branson, MO and the private company developing a new airport to serve that tourist city. For the next 30 years, the city will pay the airport company $8.24 for each arriving passenger, with an annual cap of $2 million. Now comes Phoenix-Mesa Gateway Airport with an equally innovative idea.

In this case, successful low-cost-carrier Allegiant Air is lending the city-owned airport $3 million to expand its terminal from two gates to four, and its space from 24,000 to 34,000 square feet. Under the 10-year deal, the airport will repay the loan at the rate of $4 for every passenger Allegiant brings in. The loan is unsecured, so if Allegiant goes belly-up, they won't get repaid.

Gateway is a former military base that used to be known as Williams Gateway. As of now, Allegiant provides its only scheduled service, with up to 40 flights a week to 15 destinations. (www.phxmesagateway.org)

And although some scoff at Allegiant, with its fuel-guzzling MD-80s and a business model providing point-to-point service to neglected cities, it is operating in the black-unlike most other U.S. airlines these days. And in Aviation Week's August 11th rankings of LCC and regional carriers worldwide, Allegiant scored third-best (after Ryanair and EasyJet), beating 5th-ranked Southwest and 19th-ranked JetBlue. As Mike Levine pointed out in his July 29th speech to International Aviation Club, we have no idea which business models will prove viable in an era of much-higher fuel prices. As I see it, Allegiant may have found a model that works.

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News Notes

Airport Terminal Naming Rights. If cities and counties can sell naming rights to arenas and convention centers, why not airport terminals? The Wayne County Airport Authority is hoping to do just that, with the new North Terminal at Detroit Metro Airport. The Detroit Free Press reports that about 20 companies have expressed interest in having their names attached to the $431 million new terminal, which is set to open Sept. 17th.

New Report on Common Use Facilities. The TRB's Airport Cooperative Research Program has released a new synthesis report, "Common Use Facilities and Equipment at Airports." It consists of nine chapters plus useful appendices on current practices at both U.S. and non-U.S. airports. The report is ACRP Synthesis 8. (http://onlinepubs.trb.org/onlinepubs/acrp/acrp_syn_008.pdf)

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Good News and Bad News on Trusted Traveler

bob.poole@reason.org (Robert Poole) — Mon, 18 Aug 2008 20:53:22 EDT

Well, there is good news and bad news on Registered Traveler (RT), the TSA-blessed and contractor-operated program that lets pre-screened members bypass long airport security lines. The big good news is that TSA announced in late July that RT is no longer a pilot program limited to 20 airports (of which 19 were in operation at the time of the announcement). Instead, all airports will be able to offer the service, greatly expanding the potential market for Verified Identity Pass (Clear) and Flo Corp. The other good news is that Delta has become the first major airline to embrace RT, after a year of bad-mouthing of the program from trade association ATA. Delta entered into a broad national partnership with Verified that has already led to the opening of Clear lanes at Delta's Terminal D at LaGuardia and Terminal 2 at JFK. Other airports will be coming on line soon at other major Delta-served airports. And Clear lanes should be in operation sometime in August for all carriers at Atlanta's Hartsfield-Jackson International Airport, offering relief from a major checkpoint congestion bottleneck. The bad news is we have two separate indications that TSA still does not see RT as part of its alleged "risk-based" approach to airport security. The original "trusted traveler" proposal from late 2001 envisioned it as enabling TSA, via background checks on RT members, to separate the sheep from the goats, enabling it to spend less time and resources on those passengers at the checkpoint because they had already been pre-screened. But as part of its July 24 announcement of RT going nationwide, the agency also informed us that it is eliminating its "security assessment" of RT applicants along with the $28 fee it's been charging for that purpose. Why? The assessment "largely duplicates the watch list matching that is conducted on all travelers every time they fly." In other words, the alleged background check has really been nothing of the sort, which is why TSA still requires RT members to go through exactly the same drill (remove shoes and jackets, empty pockets of metal, take out laptop, etc.) as all other passengers. In addition, TSA is doubling the number of airports (from 20 to 40) that will provide separate lanes for "expert" and "family" travelers, a form of competition with RT that requires no annual membership fee and no biometric ID card. That will undoubtedly cut into the demand that would otherwise exist for RT. I still value my Clear membership, and am glad my card will soon be usable at a lot more of the airports I use. But I really wish TSA would follow the lead of its DHS sibling, Customs & Border Protection, whose International Registered Traveler program appears to be the real risk-based thing. That would save additional time for RT members at the checkpoint, and would allow TSA to shift more of its screening resources to potentially higher-risk travelers.

TSA Doesn't Look Into Airport Security Screener Failures

bob.poole@reason.org (Robert Poole) — Wed, 13 Aug 2008 13:11:23 EDT

USA Today's Thomas Frank reports:

"A government program to find gaps in airport screening is "a waste of money" because it doesn't follow up on why screeners failed to spot guns, knives and bombs on undercover agents, the head of the House Homeland Security Committee says. A Government Accountability Office report obtained by USA TODAY says Transportation Security Administration inspectors posing as passengers do not record why individual screeners failed to spot weapons. The TSA ran 20,000 covert tests at the USA's 450 commercial airports from 2002 to 2007, and the results ought to be used to improve screening, the report says The TSA disputed the report and said it has adopted many new screening practices and technologies to close holes revealed by testing. House Homeland Security Committee Chairman Bennie Thompson, D-Miss., plans a hearing next month to press the TSA on making better use of covert tests. "You have a system that's supposed to strengthen airport security, but you don't use the results of the tests to do exactly what you're doing the tests for," Thompson said. "It's obviously a waste of money."

The legislation creating the TSA gave it a built-in conflict of interest. It is primarily a transportation security regulator, making security rules and enforcing them, not only on airports but also on seaports, mass transit agencies, railroads, and trucking companies. But at airports Congress insisted that the very same agency also be the provider of two security services–passenger screening and checked-baggage screening. So that when security lapses occur in those two areas, the TSA is not an arm's length enforcer of the rules; instead, it's stuck with egg on its face. The natural reaction of a bureaucracy in cases like that is to protect its own–which is what GAO has discovered it doing in the wake of its screeners' dismal performance when up against undercover agents. This problem will not be solved until Congress takes away the screening functions from TSA, which it could do by delegating these functions to the airports (which are already responsible for access control, perimeter security, and most other security functions–all under TSA regulatory oversight). Reason Foundation's Airport Security Research

Registered Traveler Computer Loss: Much Ado About (Almost) Nothing

bob.poole@reason.org (Robert Poole) — Wed, 06 Aug 2008 09:07:02 EDT

The leading company operating Registered Traveler programs at airports temporarily lost track of a laptop computer used to verify the identity of potential customers who sign up online and then come to the airport to have their fingerprints and irises recorded, to be encoded on the biometric ID card they will carry once approved. It turns out that the laptop was in a filing cabinet in the room from which it had been reported missing–and thus far appears not to have been tampered with. So–no big deal. And the company, Verified Identity Pass, is now installing full encryption on laptops used for this purpose. This episode actually illustrates one of the benefits of having companies, rather than the government, performing such services: accountability. Had Verified actually breached security in a serious way, the Transportation Security Administration could have imposed penalties. And for an egregious failure, could have taken away its certification to provide such services. But if TSA's airport screeners screw up (as they have numerous times, missing guns and other dangerous items at checkpoints), there are no such consequences. That's because TSA is its own regulator, and government agencies typically protect their own. This conflict of interest is built into the Aviation & Transportation Security Act of 2001, which created TSA and made it both the regulator of airport security and the provider of two of the component services–passenger screening and baggage screening. I was among a number of researchers who argued, at the time, that there would be stronger accountability if TSA were given only the regulatory role, with strong performance and accountability requirements for screening companies (which were non-existent prior to 9/11). But in the post-9/11 hysteria, it was seen by most Congress members as essential for the government to "take over" airport security. Fortunately, that mistake was not repeated when Registered Traveler was authorized in 2005. Reason Foundation's Airport Security Research

Airport Policy and Security Newsletter #37

bob.poole@reason.org (Robert Poole) — Tue, 01 Jul 2008 00:00:00 EDT

In this issue:

Airport pricing controversy continues
RT goes nationwide
Can air cargo screening mandate be met?
Hope in sight for laptops and shoes
Innovation in airport parking management
News Notes
Quotable Quotes

Controversy Over Airport Pricing Continues

Despite the FAA's imposition of caps on hourly operations at the three major New York metro area airports (LGA, JFK, and EWR), delays at both LaGuardia and Newark as of mid-July were worse than in the previous summer. And because about one-third of all U.S. airline flights originate, terminate, or fly through New York airspace, delays there ripple through the entire aviation system.

The U.S. DOT has tried hard to get market mechanisms into place, to provide real financial incentives for airlines to make better use of limited runway capacity in places like the New York airports. The airlines and the Port Authority strenuously opposed changing the landing fee structure to some form of congestion pricing. But DOT persevered, issuing a revision of its airport rates and charges policy that makes clear its long-standing view that airports may charge more for landings and take-offs during peak times; the final version was released in early July. It also requires that airports shifting from traditional weight-based landing charges make the change revenue-neutral-which could seriously limit its effectiveness, by not permitting market-clearing prices and by not generating new revenue for expanding airport capacity.

Reactions to the new policy were interesting. Airports Council International president Greg Principato welcomed the increased flexibility now available to airport operators. The Air Transport Association called the revision "disappointing and frustrating," but thus far has not followed through on previous promises that it would file suit to block the change. Interestingly, the Aircraft Owners and Pilots Association made its expected negative comment opposing any form of pricing and user fees, but did acknowledge a silver lining in the new policy. AOPA's Andy Cebula noted that it permits funds generated at an air-carrier airport to be used for capacity projects at a reliever airport owned by the same entity (e.g., Van Nuys and LAX or Teterboro and Newark).

The airlines reserved their main firepower to attack DOT's parallel effort to auction off a small portion of the slots at the three New York Airports. ATA took aim at the LaGuardia proposal, while the International Air Transport Association focused on the more recent DOT proposal for Newark and JFK. Both claimed that DOT does not have legal authority to auction slots, and ATA called the proposals "a forced march to test unproven economic theories that are unrelated to congestion."

In response, Sen. Charles Schumer (D, NY) introduced a bill, now cosponsored by Sens. Hillary Clinton (D, NY), Frank Lautenberg (D, NJ), and Elizabeth Dole (R., NC), to prohibit DOT from carrying out slot auctions at any U.S. commercial airport. In addition, S.3150, the Access to Air Travel Act, would forbid FAA and DOT from imposing peak-period pricing at any airport, something FAA has acknowledged it has no legal authority to do. It also would forbid FAA from "charging a fee for the right or permission to use navigable airspace at such airport," which would circumvent any attempt by FAA to charge for final approach, as opposed to the actual landing. Fortunately, the bill explicitly does not limit the authority of any airport operator to carry out "its proprietary powers and rights," one of which is to charge for the use of its runways.

Meanwhile, the lack of a market for slots at congested airports is leading to some interesting competition issues, as incumbent carriers scale back their operations due to high fuel costs and reduced demand for air travel. American, for example, this fall will eliminate 28 mainline and 34 Eagle flights at O'Hare, and 5 mainline and 37 Eagle flights at LaGuardia. Other major carriers plan similar cuts. So the question now is: what happens to the slots those flights now use? Under long-standing FAA lose-it-or-use-it rules, those slots should become available to other carriers seeking to expand service in those markets. At least one such carrier, Virgin America, has announced plans to expand at both O'Hare and JFK. To prevent such competition, a bevy of carriers (American, Delta, Northwest, United, and USAirways, shamefully joined by normally pro-competition AirTran) in June asked DOT for a blanket waiver of the rules, to permit them to hold onto such slot s for the duration of the industry's adjustment to higher fuel prices. Fortunately, DOT rejected that plea as anti-competitive, though it said it would consider individual waivers on a case-by-case basis.

I hope DOT will stick to its guns, upholding the competition that airline deregulation was intended to foster (and which airport pricing would encourage). And let's hope that Schumer's bill gets lost in the election-year shuffle.

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Registered Traveler Goes Nationwide

Well, there is good news and bad news on Registered Traveler, the TSA-blessed and contractor-operated program that lets pre-screened members bypass long airport security lines. The big good news is that TSA announced in late July that RT is no longer a pilot program limited to 20 airports (of which 19 were in operation at the time of the announcement). Instead, all airports will be able to offer the service, greatly expanding the potential market for Verified Identity Pass (Clear) and Flo Corp.

The other good news is that Delta has become the first major airline to embrace RT, after a year of bad-mouthing of the program from trade association ATA. Delta entered into a broad national partnership with Verified that has already led to the opening of Clear lanes at Delta's Terminal D at LaGuardia and Terminal 2 at JFK. Other airports will be coming on line soon at other major Delta-served airports. And Clear lanes should be in operation sometime in August for all carriers at Atlanta's Hartsfield-Jackson International Airport, offering relief from a major checkpoint congestion bottleneck.

The bad news is two separate indications that TSA still does not see RT as part of its alleged "risk-based" approach to airport security. The original "trusted traveler" proposal from late 2001 envisioned it as enabling TSA, via background checks on RT members, to separate the sheep from the goats, enabling it to spend less time and resources on those passengers at the checkpoint because they had already been pre-screened. But as part of its July 24 announcement of RT going nationwide, the agency also informed us that it is eliminating its "security assessment" of RT applicants along with the $28 fee it's been charging for that purpose. Why? The assessment "largely duplicates the watch list matching that is conducted on all travelers every time they fly." In other words, the alleged background check has really been nothing of the sort, which is why TSA still requires RT members to go through exactly the same drill (remove shoes and jackets, empty pocket s of metal, take out laptop, etc.) as all other passengers.

In addition, TSA is doubling the number of airports (from 20 to 40) that will provide separate lanes for "expert" and "family" travelers, a form of competition with RT that requires no annual membership fee and no biometric ID card. That will undoubtedly cut into the demand that would otherwise exist for RT.

I still value my Clear membership, and am glad my card will soon be usable at a lot more of the airports I use. But I really wish TSA would follow the lead of its DHS sibling, Customs & Border Protection, whose International Registered Traveler program appears to be the real risk-based thing (see Issue No. 33). That would save additional time for RT members at the checkpoint, and would allow TSA to shift more of its screening resources to potentially higher-risk travelers.

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Can the Air Cargo Screening Mandate Be Met?

Last fall Congress enacted the 9/11 Commission Act of 2007. Among its provisions was the requirement that TSA implement a system to physically screen cargo carried on passenger planes: 50% of such cargo by February 2009 and 100% by August 2010. At the time, I pointed out that while this mandate sounded costly and cumbersome to those in the cargo supply chains, it did promise to fix a glaring inconsistency in the original Aviation & Transportation Security Act of 2001. That measure mandates 100% explosives screening only for checked luggage on planes, ignoring not only belly cargo but also carry-ons (much less rigorous screening than checked bags) and passengers themselves (the vast majority of whom are checked only for metallic objects).

A lot has happened in the past year. Despite some initial complaints from the New York Times editorial page and cargo-screening advocate Rep. Ed Markey (D, MA), TSA is proceeding with its plan to distribute the screening to various points in the cargo supply chain, rather than concentrating it all at the airport (which would cause huge bottlenecks). The program is called Certified Cargo Screening Program (CCSP), and under it, both shippers and freight forwarders may opt to become Certified Cargo Screening Facilities (CCSFs), where actual screening and sealing of shipping crates, pallets, or containers would take place. Sealed boxes would then be transported to the airport by certified personnel, where they would be turned over to airlines for loading onto planes. The advantage to shippers and forwarders is that their cargo will likely get onto planes sooner than what ends up getting screened at the airport.

Last year the Congressional Research Service made an initial estimate that the belly-cargo screening mandate would cost $3.7 billion over its first 10 years. The only number I've seen since then is in GAO's July 15, 2008 testimony on TSA's progress in this area (GAO-08-959T). GAO's Cathleen Berrick reported that although CCSFs will be required to purchase their own screening equipment, TSA will reimburse them up to $375,000 per facility. There are about 12,000 freight forwarders, not all of whom will volunteer for this role, but a number of manufacturers probably will, so let's use 12,000 as an estimate of the number of CCSFs. At $375K apiece, the equipment cost alone would be $4.5 billion. To that one-time cost must be added the annual staff and paperwork cost at each CCSF, plus the annual cost of TSA inspectors to oversee the whole process. It's clear this is going to cost a lot more than CRS estimated.

Lest you think this is just about small packages and other mundane stuff, belly cargo consists of about 250 million individual packages (boxes, crates, pallets, containers) per year. And at $4.4 billion, it's a non-trivial portion of airline revenue. (Domestic passenger revenue in 2005 was $71.2 billion.) Stuff shipped this way includes laptop computers, auto parts, human organs, fresh flowers-an incredible array of things. That makes physical screening quite complicated.

GAO says TSA is making progress, but still faces four major challenges in implementing the system. First, it's still testing various technologies, to decide which ones work well enough for it to certify. Second, there are a number of long-standing exemptions from physical screening, and TSA has to review them all to see which ones might still be justified under the new law; that work is still under way. Third, TSA has a lot of work to do to expand its staff that does compliance inspections of freight forwarders, since it will also have to inspect shippers that become CCSFs. In a 2005 report, GAO found that TSA had inspected only 49% of forwarders, and had found violations at more than 40% of those inspected. Finally, GAO pointed out that TSA does not plan to include "inbound" cargo in this program-although Customs & Border Protection already screens inbound cargo upon its arrival here.

TSA says it will meet the February 2009 deadline for screening 50% of belly cargo. I'm not holding my breath, given all it has left to do. And I still question whether this new mandate from Congress is a wise use of resources-as opposed to devoting much of that money to better intelligence work to identify potentially high-risk cargo.

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Hope In Sight on Laptops and Shoes

There are prospects that TSA might be in a position to reduce two of the hassles of current passenger checkpoint screening: removing laptops from carry-on bags and removing your shoes.

You may have seen recent news coverage about "checkpoint-friendly" computer cases being developed by luggage makers and undergoing testing by TSA. A July 7 USA Today story reported that the agency may be within a month of allowing such devices. Among the competitors are CODi of Harrisburg, PA; Skooba Design of Rochester, NY; and California-based Pathfinder Luggage. TSA does not plan to actually certify any of them, but is offering guidelines for what constitutes a "checkpoint-friendly" case. The reason laptop-removal is now required is so that screeners can view its circuitry on their X-ray screen unobscured by other wires or electronic devices-and also to prevent the laptop from being used as a shield to hide weapons. So the new case must be designed with a sleeve that holds only the laptop, with a separate portion for carrying other accessories.

I see two major drawbacks with this approach. First, a lot of cases that will be marketed as checkpoint-friendly won't be, and will lead to lots of instances in which the screener stops the belt and requires the laptop to be removed and run through again by itself. This will slow things down for everybody else. Second, since airlines are getting fussy about enforcing the two-carry-on maximum, I for one don't want a separate carrying case for my laptop. I travel with a roll-aboard and a briefcase, and the laptop goes in one or the other. Unless they invent a briefcase with a fold-out laptop pocket that otherwise meets my briefcase needs, I won't even consider such a product.

A far better approach is the new multiview checkpoint X-ray machines that I wrote about in Issue No. 36. These machines are now in use at all seven of BAA's airports in Scotland and London--more than 200 of the Smiths Detection machines in all. British aviation security officials have concluded that the sophisticated, multi-view imaging capability provides an accurate look into laptops that are inside ordinary carry-on bags. Hence, passengers are BAA airports are no longer required to remove their laptops. Time savings in checkpoint processing are estimated at 15%, so far. TSA is installing 900 multiview X-ray machines this year, at major airports nationwide. One can only hope that they talk with their U.K. counterparts to understand how and why they have found the new machines up to the task of checking laptops contained in ordinary carry-on bags.

What about shoe removal? The good news here is that the GE-developed shoe scanner that had been expected to be installed at all of Clear's Registered Traveler airport checkpoints-but had twice been turned down by TSA-is now in actual airport trials. After further development by GE and further testing at TSA's Transportation Security Lab in Atlantic City, it is being installed in the baggage-claim area at Atlantic City International Airport to test customer reaction to the device (and presumably to gather real-world data about what it detects on people's shoes). TSA has not said how long this testing will run, or what else may have to be done in order to certify the shoe scanner, but at least there is activity on this much-needed improvement.

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New Parking System at SeaTac

In Issue No. 33 I reported on a very high-tech system installed in the 3,800-space short-term parking structure for Heathrow's new Terminal 5. It guides an incoming driver to the nearest available space, and upon his return, tells him where the car is parked. My source for that story did not reveal the cost, but I'm sure it was substantial. Still, such a system is easier to include when a new parking structure is being designed and built-as opposed to retrofitting some kind of parking guidance into an existing structure.

But that's what has been developed in-house at Seattle-Tacoma International Airport. As reported in Aviation Daily (June 24, 2008), the new system was retrofitted into a facility first built in the 1970s, with two subsequent additions, for a total of 8,500 spaces. The cost was just $400 per space. SeaTac's IT people found a video system that could identify vehicles but did not have the software to calculate available spaces and display that information on display boards. They developed the software in-house, and the now-operational system first gives incoming drivers a count of available spaces on each floor. Next, at the approach to each level, additional displays indicate how many spaces are available to the left and to the right. And the final signs show how many spaces are unoccupied in each four-row section.

What a great convenience for those hunting for a parking space, as I spend untold hours doing every year. Kudos to the software people at SeaTac.

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News Notes

Hassle Factor Reducing Air Travel. According to a survey commissioned by the Travel Industry Association, nearly half of all U.S. air travelers said they would fly more if air travel were easier, and more than 25% skipped at least one trip in the past year due to the hassles involved. Based on the survey data, Americans took 41 million fewer trips by air in 2007, costing the travel industry-airlines, hotels, and car-rental companies--$18 billion. Those who flew five or more times in the past year had the worst impression of air travel.

New TSA Focus on Airside Security. Nearly eight years after 9/11 put the spotlight on aviation security, the TSA has created a new program to reduce airports' vulnerability on the airside-the ramp, taxiways, runways, etc. The Airside Vulnerability Reduction Team will be headed by former Atlanta Airport Federal Security Director (and former L.A. police chief) Willie Williams. The idea is to apply community policing techniques to airports, especially to the "secure" areas outside the terminals.

U.S./U.K. Trusted Traveler Program. The International Expedited Traveler Initiative between the USA and the United Kingdom was signed on June 24th. It will allow prescreened passengers with a biometric ID card to have expedited processing when arriving by air in either country. On the U.S. side, this is one application of the DHS's "Global Entry," an international registered traveler program. Americans who pass a background check and provide fingerprints can use their biometric ID card to bypass passport processing lines upon returning to this country, checking instead at a kiosk. DHS has also recently signed a Global Entry agreement with The Netherlands.

TSA vs. ACLU on Watch Lists. Following an American Civil Liberties Union news conference July 14th, which claimed that the terrorist watch list is approaching one million names and should be curtailed, TSA posted a refutation on its website. The FBI's Terrorist Screening Center, said TSA, has about 400,000 individual names on its consolidated watch list, 95% of whom are not U.S. citizens or residents. Furthermore, said TSA, fewer than 50,000 people are on the two passenger screening lists: the selectee list (requiring secondary screening) and the No Fly list.

Separate Screening Lines for Pilots-and Politicians. TSA announced in mid-July that it is testing separate secure checkpoint screening for commercial flight deck crew members; this check will take place at exit lanes, where there are no X-ray or metal detector units. The new checkpoints will be equipped with access to a secure database to verify the crewmembers' credentials. This move is long overdue; after all, a flight crew does not need weapons to take down a plane; all they have to do is fly it into the ground or a building. CrewPASS is in a 60-day trial at BWI, Pittsburgh, and Columbia, SC. Incidentally, an airport executive passed along to me the news that for some time now, TSA has maintained a "special screening policy that enables politicians, as well as their armed security personnel, to bypass [regular] TSA checkpoints."

New Reports on Airport Ground Access. The Transportation Research Board's new Airport Cooperative Research Program has issued two more reports on ground access. ACRP Legal Research Digest #3 is "Survey of Laws and Regulations on Airport Commercial Ground Transportation." And Report #4 is "Ground Access to Major Airports by Public Transportation."

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Quotable Quotes

"Repeated attempts to avoid economic reality by aviation special interests have produced an increasingly unreliable aviation system. In our economy, prices work not only to balance supply and demand, but also to add capacity where we need it - not just where politicians want it. In other words, the argument championed by airline lobbyists . . . that "we just need more capacity and technology, not pricing," incorrectly assumes that these are competing concepts. But the main reason we have failed to add capacity and modernize our air traffic control system is that our approach to paying for aviation infrastructure completely disconnects the price of using capacity from its true costs and thus promotes overuse at popular airports and during popular flying times. It's understandable that the airline industry wants to protect its interests. But the Transportation Department is in the business of protecting consumers, fostering competition, and providing reli able air travel, not placating special interests. Independent economic experts of all political backgrounds agree that either auctions or congestion pricing is far preferable to the failed experiment we have now."
--DOT Secretary Mary Peters, "End Gridlock on the Runway," New York Times, July 22, 2008.

"There are so many variables and contingencies that we don't now know the answers to these questions [about the shape of the airline business in response to much higher oil prices]. Certainly, no government effort to find and implement a planned answer can be conducted free of intense interest-group politics and crippling complexity. Nor can it be conducted quickly (consider the FAA's struggle with sectional and labor interests in its efforts to restructure ATC). There would be no logic in outsourcing this decision to a private monopoly, either. Any single management will be limited by its own history, talent, circumstances, prejudices, and incentives. In short, neither an all-seeing government nor any single private management can be relied on to predict the shape of the industry as we move through what may well be a terrible and rapidly-changing period. What is essential is that we generate multiple, competing predictions, along with the freedom for f irms to innovate using them and see which innovations flourish and which ones die. Only a deregulated market can do that."
--Michael E. Levine, New York University School of Law, International Aviation Club, July 29, 2008

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Airport Policy and Security Newsletter #36

bob.poole@reason.org (Robert Poole) — Sun, 01 Jun 2008 00:00:00 EDT

In this issue:

Re-regulate the airlines?
Airport employee screening
More checkpoint improvements
America's first all-new privatized airport
Aircraft survivability-an overdue question
News Notes

Crandall Says Airline Deregulation Has Failed

This year marks the 30th anniversary of the Airline Deregulation Act of 1978. As intended, the legislation led to sweeping changes, opening up both fares and routes to competition. Previously, under the misguided belief that airlines were essentially public utilities (like electricity, gas, or water), both fares and routes had been set by the Civil Aeronautics Board, which limited the number of carriers on each route and set identical fares that reduced airlines to competing on things like who offered better meals and pillows. The cost of that cartelization of the industry was fares that only the relatively well-off could afford. One of the best characterizations of what airline deregulation wrought was "the democratization of air travel."

So it was with great dismay that I opened Aviation Daily on June 11th to be greeted by a page 1 headline, "Crandall Calls for Reregulation, Changes to Pricing, Bankruptcy, Labor Rules." Had one of the great survivors of airline deregulation-inventor of "yield management" and frequent-flier programs, master of hub-and-spoke operations-really gone over to the dark side?

Well, not quite. Crandall's speech to the Wings Club in New York on June 10th really did say that "unfettered competition just doesn't work very well" in airlines and that "airlines look and are more like utilities than ordinary businesses." But that was early on. As he got into it, Crandall did not actually call for anything like a return to the cartel enforced by the CAB. Rather than reregulation, he called for some kind of government intervention to cause airlines to de-emphasize congested hubs and offer more non-stop, point-to-point service. His suggested mechanism is an air-fare regulation that would require that a flight from A to B via a hub be priced at the sum of the local fares (from A to hub plus from hub to B).

Crandall's intent is noble-to decongest hubs by encouraging more non-stop flights and the use of larger planes on flights to and from hubs. But direct government intervention in air fares is a blunt and overly intrusive way to encourage such changes. Far more straightforward-and consistent with continued competitive choices for air travelers-is simply to price the aviation infrastructure properly. That would mean replacing weight-based runway charges with market-based charges, to maximize the economic value of using scarce runway capacity at congested airports.

Crandall points in that direction when he calls for government to not allow more flights to be scheduled at congested airports than the airports' actual hourly capacity. But again his proposed remedy is anti-competition and anti-consumer. It would scale back all existing operations proportional to their current size-and presumably freeze that allocation in place. But that would throw out one of the main benefits of 30 years of airline deregulation-low barriers to entry for companies with potentially better ideas: Southwest, JetBlue, AirTran, Virgin America, etc. Commercial aviation was transformed by deregulation from a very static industry-no new carriers licensed at all during the CAB's decades in charge-to a dynamic industry, in which entrepreneurs are free to try new approaches. Even though most new airline business models don't make it, those that do have produced enormous benefits for air travelers.

I think Crandall is right that some of the other ground-rules facing commercial aviation need re-thinking-such as (1) bankruptcy laws that allow carriers to continue operating and charging low fares while stiffing their creditors and (2) labor legislation that lets unions hold carriers to ransom. But I think he's naïve about the potential of high-speed rail to relieve airlines of the burdens of serving short-haul markets. Serious high-speed rail in 250- to 400-mile markets would require tens of billions in subsidy from general taxpayers. By contrast, aviation just about pays for its entire airport and ATC infrastructure cost, via various user taxes.

The 30th anniversary of airline deregulation is an appropriate time to think hard about U.S. aviation policy. Bob Crandall has done us all a service by raising questions about the current policy and legal framework. Fortunately, he has not called for a return to the bad old days of the CAB.

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Whatever Happened to 100% Airport Employee Screening?

In March 2007, two airline employees were arrested at Orlando International Airport and charged with smuggling guns and marijuana to Puerto Rico. Their M.O. was to hide the contraband at night on planes scheduled to fly to San Juan the next day. The incident set of a nationwide furor over the relative lack of access control for the airside portion of commercial airports. Some in Congress and the media called immediately for 100% physical screening of all airport workers with access to the airside, a plan which the Orlando airport began implementing on its own after the incident. An October 2007 report from the Government Accountability Office (GAO-08-139T) on aviation security listed perimeter security, access control, and biometric IDs as three areas in which TSA has "generally not achieved" what is required.

Since 100% physical screening could be very costly (Orlando spent $5 million in its first year on equipment and salaries, and estimates annual costs will be about $3 million), the two airline trade groups worked with the Transportation Security Administration to develop and test alternatives. Last year TSA set up roving teams of inspectors to do random checks of airside workers, and some airports (like Chicago's O'Hare and Midway) implemented biometric ID cards for all airport employees. TSA and the airport associations proposed a six-month pilot program to rest a variety of techniques at six airports during 2008. In January, Congress authorized just a 90-day pilot program at seven airports, and it got under way in May.

In the pilot program, Boston Logan, Jacksonville (FL), and Craven Regional (NC) will test 100% physical screening. Denver, Kansas City, Eugene (OR), and Southwest Oregon Regional will each test a set of alternatives to 100% screening, including behavior detection, random checks, security awareness training, and portable screening equipment. Boston and Denver will also evaluate biometric access controls.

This approach strikes me as far more sensible than imposing a nationwide mandate for 100% physical screening. As I wrote in Issue No. 24, many airport and airline employees need to go back and forth between secure and non-secure areas many times each shift, so making them go through passenger-type screening would be very time-consuming. Airline passengers are also largely unknown quantities, whereas airport workers have already passed a background check. It seems likely that more-detailed background checks and biometric ID cards, plus random checking, would be far more cost-effective than 100% physical screening. But a 90-day trial is pitifully short, compared with TSA's original proposal of six months, so it's not clear how much we will really learn from this experiment.

As of now, besides Orlando only two other airports do 100% employee screening-Miami and Phoenix. Like Orlando, both decided to do so after a serious security breach. In Miami's case, it was the 1998 busting of a major drug-smuggling operation at the airport, while in Phoenix it was last July's exposure of essentially open access to secure areas during the night shift, when only rent-a-guards were on duty.

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More Checkpoint Improvements Being Rolled Out

Assuming we must continue to have checkpoint screening of passengers indefinitely, what's the gold standard we should be looking toward, both for better security and greatly reduced hassle? Seems to me it would include much better detection of threat objects in carry-on bags, fast and unobtrusive screening for threat objects on everyone's person (not just at secondary screening), and not having to remove liquids or laptops from carry-ons. And all at a cost comparable with today's checkpoint costs.

We're not there yet, but there is tangible progress toward most of these goals. First, TSA is moving fairly rapidly to replace old-fashioned one-dimensional X-ray units with advanced 2-D (multi-view) machines. By using both high-energy and low-energy X-rays from different angles, the 2-D machines allow much better identification of objects within a carry-on bag-and potentially, identification of the chemical composition of substances in containers. That, in principle, could lead to getting rid of the Ziploc routine for carry-on liquids.

TSA has awarded contracts, for 500 machines each, to Rapiscan and Smiths Detection, and these are being rolled out across the country. As of late May, two airports had been fully switched over to the Smiths aTiX machines, Albuquerque and Denver. TSA's Christopher White told Aviation Daily that by the end of FY 2008 (Sept. 30, 2008), "We expect the majority of security checkpoint lanes in major airports to have advanced X-ray machines." And that is good news for air travelers. With ongoing software algorithm development, it's conceivable that TSA could give the OK for airports using one or both of these new machines to eliminate the requirements to remove laptops and/or liquids from carry-on bags. All of BAA's U.K. airports are now equipped with the Smiths aTiX machines, and laptop removal is no longer required there.

Another improvement is possible by using another Smiths innovation-the iLane advanced conveyor system. In addition to returning empty bins back to the front of the line (preventing delays due to lack of bins, and saving TSA staff time), iLane also provides a secondary belt onto which screeners can shunt a suspicious item, rather than stopping the main belt and making everybody wait while the discrepancy is resolved. That could significantly speed up the lines. Four iLanes are in place at Baltimore's BWI airport, and they are also at many of the BAA airports in Britain.

There is also progress on body-imaging systems. The only ones that have been tested at airports to date-backscatter X-rays and one version of millimeter wave scanning-require the traveler to stand in a booth for up to a minute. That takes up so much time that it is only feasible for secondary screening. What's needed is a scanning system that can detect weapons and explosives under clothing while the passenger walks through the checkpoint. TSA is testing a millimeter-wave camera system from QinetiQ North America, which can reportedly screen people from up to 20 yards, without requiring them to stop. But thus far, the tests involve only transit stations and TSA labs, not airports. Another full-body millimeter-wave body-imaging system is made by Brijot Imaging Systems; their website shows their GEN 2 system screening people as they walk at normal speed through what could be an airport checkpoint lane (www.brijot.com). A nother approach, being pioneered by Britain's ThruVision, uses terahertz rays to do the same thing, also while people are moving. Its T-ray camera system is called T5000.

Cost remains a challenge. The 2-D systems cost about twice what conventional 1-D machines cost. I have not yet seen any cost estimates for walk-though millimeter-wave or T-ray systems, but they would be logical replacements for today's inadequate metal-detectors. The combination of 2-D X-rays for carry-ons and routine walk-through body imaging would make for a major increase in aviation security.

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Branson Airport Breaks the Mold

About five years ago I first learned that a group of investors was attempting to develop a private, for-profit airport to serve the popular country-music city of Branson, MO. The nearest airport with scheduled service is Springfield, 52 miles to the north. And that airport has no low-cost service (except a handful of Allegiant Air flights), despite Branson's general appeal to low-budget travelers. But for a number of years there seemed to be no progress on getting the airport off the ground.

That changed last June, when Branson Airport LLC issued $113 million in bonds, underwritten by Citigroup, to fund construction. The partnership itself invested $25 million, to make up the total of $140 million for the project. Ground-breaking took place last July 20th, and you can go to the airport web site (www.bransonair.net/aviation) to see both ground-level and aerial photos of the construction. Paving began in April and the terminal building contract was awarded in May. Opening date is projected as May 2009.

The big question, of course, is whether there will be commitments for airline service by then. The company is aggressively marketing the airport to low cost carriers (LCCs), pointing out that many Branson visitors avoid the Springfield airport in favor of more-distant airports like Kansas City, Little Rock, St. Louis, and Tulsa, to which they can fly on LCCs and then drive 3 to 4 hours to Branson. Branson Airport executive director Jeff Bourk (formerly deputy director at Portland, Maine) told Aviation Daily's Airports weekly (May 27, 2008) that because the airport has no FAA grants, it is not constrained by FAA grant agreements, as are nearly all other air-carrier airports. Hence, Branson can offer an airline an exclusive N-year deal on serving Branson from City A. That assurance of no competition means the airline could charge a somewhat higher fare, but still less than what it would cost on a legacy carrier's regional affiliate to serve Brans on via Springfield.

Branson Airport has also negotiated a unique public-private partnership deal with the city, which wants to expand convenient air service. Under a 30-year agreement, the city will pay the airport $8.24 for each arriving visitor, with an annual cap of $2 million. Thus, the city has a direct stake in the airport's success.

As the airline industry goes through a wrenching time, and smaller cities are losing air service, the Branson model will be worth watching.

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How Vulnerable Are Airliners to Bombs?

Better late than never, the TSA has asked three national labs to research the actual vulnerability of airliners to bomb damage. Yes, "everyone knows" that a bomb can bring down an airliner. But what are the most vulnerable points, and how large an explosive is required to do the critical amount of damage? At this point, it appears that nobody knows. We do know that some large airliners have survived hits by shoulder-launched, heat-seeking missiles in the Middle East, which suggests that losing a wing-mounted engine to such a missile is not necessarily fatal. But what about small improvised explosive devices in overhead bins or cargo holds?

That is the kind of question Lawrence Livermore, Los Alamos, and Sandia Laboratories will be exploring. Each is to work independently, primarily via computer modeling, and each will peer-review the others' work. Preliminary results are due at TSA by sometime this fall. The results may well lead to revising the requirements for screening both checked luggage and carry-ons. TSA Administrator Kip Hawley says that little research on airframes and explosives has been done over the past decade, and the fleet has changed considerably since then. "This is something that when the new administration comes in, I think, will give them a very good handle on some of these issues with huge security and cost implications down the line," he told Aviation Daily.

It's too bad Congress didn't have-or ask for-this kind of data when it rushed to pass the Transportation Security Act in late 2001 (legislate first, think later). But as I said, better late than never.

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News Notes

Registered Traveler Keeps on Growing. Clear last month opened RT lanes at Salt Lake City, making that the 16th airport in the Clear network. And this month the company announced a major deal with Delta Airlines, under which it will operate Clear lanes in the Delta terminals at JFK, LaGuardia, and Los Angeles. LAX has not previously had any RT service, so that's another addition to the network, at least for Delta flyers. And BWI Airport has issued an RFP for Registered Traveler service, which would mean that travelers at all three Washington/Baltimore area airports will soon have RT service available.

Prague Airport Privatization a "Go.". The Czech government announced early in June that it will proceed to sell its 100% stake in the Prague Ruzyne airport. The thriving (and profitable) airport is taking advantage of rapid growth in central and eastern Europe, and a proliferation of LCC service. A number of leading airport companies have expressed interest, and media reports estimate the airport could be worth in excess of $6 billion. The privatization is scheduled to be completed in the second half of 2009.

Noteworthy New Book. I heartily recommend a new book by friends and colleagues George Donohue and Russ Shaver. Terminal Chaos: Why U.S. Air Travel Is Broken and How to Fix It was published in May by the American Institute of Aeronautics and Astronautics as part of their Library of Flight Series. More details at www.aiaa.org/donohuepress.

Citigroup Invests in Vancouver Airport Unit. Last month Citi Infrastructure Investors (CII) announced a deal to acquire 50% of YVR Airport Services Ltd., a subsidiary of the Vancouver International Airport. YVR will then become CII's vehicle for investing in the airport sector. YVR operates 18 airports in seven countries. CII is Citigroup's fund for investing worldwide in infrastructure enterprises, comparable to other recently created funds from Morgan Stanley, Goldman Sachs, Macquarie Bank, and others.

Landing Fees a Small Expense. From all the cries of alarm raised by airlines over proposals for congestion-priced landing fees, you might think that landing charges were a significant cost item in airline operating budgets. Data compiled by Oliver Wyman for fourth quarter 2007 present a different picture. For the six network (legacy) carriers, landing fees averaged 1.5% of their cost per available seat mile (CASM). The four leading LCCs averaged 2.4%, and the nine principal regional carriers averaged 3.3%. Those categorized as "select" (e.g., Alaska, Hawiian, Midwest) averaged 1.7%. Just so we can keep these things in perspective.

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Airport Policy and Security Newsletter #34

bob.poole@reason.org (Robert Poole) — Tue, 01 Apr 2008 00:00:00 EDT

In this issue:

Midway privatization: six first-class teams
Slot auctions for LaGuardia
Second-generation checkpoints
Next steps on runway incursions
News Notes
Quotable Quote

Six Teams Seek Midway Airport Lease

If there was any question whether investors would be interested in a long-term lease of Chicago's Midway Airport, it was answered in the affirmative at the beginning of April. Six high-powered teams submitted their qualifications to the city, which will presumably winnow them down to the best-qualified subset, who will then be invited to submit formal bids. With the basic terms of the lease already decided (in order to win agreement from Midway's airlines), the winner will be the firm offering the highest dollar amount.

The six teams included mostly firms that had been expected to bid-though noticeably absent were industry giants Ferrovial (which may have its hands full refinancing its costly acquisition of BAA) and Fraport (which had been rumored to be seriously interested). The six that did submit qualifications are:

Abertis/Babcock & Brown/GECAS-Abertis owns TBI which operates Albany and Burbank airports under contract, and has long-term leases for the terminals at Orlando-Sanford.
Macquarie Capital/Macquarie Airports/Macquarie Infrastructure Partners I and II-Macquarie already has a Chicago presence via its lease of the Chicago Skyway and holds stakes in Sydney, Brussels Charleroi, Bristol (UK), and Copenhagen airports.
Hochtief AirPort/GS Global Infrastructure Partners I-Hochtief has major stakes in Athens, Budapest, Dusseldorf, Hamburg, and Sydney airports.
YVR (Vancouver) Airport Services/Citi Infrastructure Investors/John Hancock Life Insurance-YVR operates airports in Chile, Dominican Republic, Jamaica, and Canada.
Morgan Stanley Infrastructure Partners/Aeroports de Paris/HMS Host-ADP owns the three major Paris airports and operates other airports in Cambodia, China, and Europe.
AirportsAmerica Group/Carlyle Infrastructure Partners-a somewhat mysterious group about which Carlyle has declined to provide details (except, presumably, to the city of Chicago).

The city has not released a timetable, but it's likely to announce the short-list within a couple of months, along with a formal invitation for the short-listed teams to submit their bids. Lisa Schrader, the city's deputy CFO, told Aviation Daily that they expect to close the lease transaction within 9 to 12 months, after approvals from the FAA, TSA, and the City Council.

There is much speculation as to how much will be offered for the 50-year lease. In Issue No. 32, I expressed skepticism that the figure would be in the $3 billion range that has been mentioned in many media reports, given the airport's small land area (one square mile), limited airside capacity, and already fairly well-developed retail operations. But in recent weeks I've had several knowledgeable people suggest to me that there is more potential than meets the eye at Midway. For example, as of now, there are 1,895 weekly airline departures, but as recently as 2004 that number was 2,449-so we know that a 30% increase (at least) is possible. An attorney advising one team suggested that his team had come up with a number of creative options to maximize value at the airport. Another told me that there has been recent interest by developers in acquiring land bordering Midway, in hopes of being able to negotiate joint-development deals with the winning bidder. So while I remain somewhat skeptical, I'd be pleased to be proven wrong.

If Midway does generate significant value for the city, the lease could be as precedent-setting as the city's January 2005 lease of the Chicago Skyway. That transaction focused global attention on the United States as a new market for privatization of toll roads. But for the same thing to be possible in the airport sector would require Congress to amend the Airport Privatization Pilot Program legislation it enacted in 1996 . Although it permits four air carrier airports to be leased, only one can be a large hub, which is how Midway is categorized by the FAA. The FAA's reauthorization proposal, which was largely ignored by Congress last year, had called for liberalizing the pilot program. It would probably take active lobbying by America's mayors to open up additional large-hub privatization opportunities.

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DOT Plans Slot Auctions for LaGuardia

Unwilling to give up on a market-based approach to dealing with New York airport congestion, the U.S. DOT last week unveiled a proposal to implement slot auctions at LaGuardia (LGA) over a 10-year period. It offered two versions, each of which would grandfather most existing carrier slots (for the whole 10 years) and then annually auction off a small percentage of the remaining slots over a five-year period. Under the first option, 2% of the slots would be retired during each of the first five years, resulting in a 10% reduction. Under the second option, there would be no slot retirements. Proceeds from the auction would go for New York airspace capacity improvements under the first option and to the airlines (presumably according to some formula) under the second.

I give this proposal one-and-a-half cheers, and I must give credit to DOT for persisting in trying to implement market-based allocation of limited capacity. Since the Port Authority is unwilling to make use of its newly clarified (by DOT) authority to implement market-based runway/landing charges, the only other market alternative is auctions. In principle, slot auctions should produce changed airline incentives more or less equal to what runway charges would produce. But runway pricing has the big advantage of applying to all planes (including non-scheduled ones) right from the start, whereas any likely auction system would, like this proposal, be phased in over time. Hence, its delay-reduction benefits would take longer to achieve-and in this case, would likely be modest.

Even without retiring any slots, a full auction (of all slots) would reduce congestion, since it would increase the cost to an airline of operating peak-period slots with low-revenue aircraft. The two effects that flow from this would be (1) shifting low-revenue flights to off-peak times, and (2) up-gauging from smaller to larger planes, on routes now served at high frequency by smaller regional jets (which would get fewer flights on larger jets, for the same or greater passenger throughput).

Airlines will surely protest that DOT cannot auction slots that belong to them. But DOT has established a several-decade record stating from the outset and repeatedly thereafter that slots are not property but merely permissions which can be withdrawn at any time. I'm not an attorney, but I think DOT is on solid legal ground on this point. There is also a question as to whether DOT can do this as a "rulemaking" rather than getting permission, via legislation, from Congress, and I imagine airlines will make that point, too.

Thus far, both the international and domestic airline trade associations, IATA, and ATA, have issued statements denouncing the proposal. And to my surprise, Virgin America (which thus far has not been able to gain access to LGA) criticized it as well, since new entrants will have to buy slots while incumbents keep most of theirs at no charge. Virgin is right that a truly level playing field would auction all slots, but that was much farther than DOT was willing to go.

You can read the DOT's notice of proposed rulemaking at: www.regulations.gov, Docket No. FAA-2006-25709. Comments may be made until June 16th.

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Second-Generation Checkpoints

In my last update on security screening checkpoints (Issue No. 31), I noted that TSA was finally testing alternatives to the 1960s-era X-ray machines used to screen carry-on bags-some are 2-D machines (still a big improvement) while others are four-times-more-costly 3-D X-rays. The big advantage of the latter is that laptops and liquids would not have to be removed from luggage, but the cost difference might mean it would take a decade or more before all screening lanes could be equipped.

So, on the principle that the best can be the enemy of the good, I was pleased to see TSA's announcement two weeks ago that it will be purchasing and installing 580 more of the 2-D machines this year, bringing the total to 830. Of course, using very expensive 3-D scanners for checked luggage while using only 2-D scanners for carry-ons remains a glaring inconsistency, since an aircraft-destroying amount of explosives can be carried in a roll-aboard bag just as easily (though a bit less anonymously) as in a checked bag.

There is also progress on the non-metallic-threats-hidden-under-clothing front. TSA is buying 30 more $150K millimeter wave scanning portals, after a successful test at Phoenix Sky Harbor. Initial installations will be at JFK and LAX. In these still-limited applications, the whole-body scanners will continue to be used only in secondary screening, as a voluntary alternative to pat-downs. Ideally, a device such as this would replace the magnetometer as the standard through which all passengers (except perhaps Registered Travelers) would pass, since all are now screened for metallic knives and guns, but not for things like plastic explosives or ceramic knives which are just as dangerous. The big limitation has been scanning time, but this seems close to being solved. The ProVision Portal being tested by Qantas and Melbourne (Australia) Airport requires only three seconds of dwell time per passenger; allowing twice that to include entry and exit time, that would still permit 10 passengers per minute or 600 per hour.

Further back in the R&D pipeline are several other promising technologies. Argonne National Laboratory has developed a new way to generate terahertz radiation (T-rays), which are low-energy and non-ionizing. They can be used both to see through shoes and clothing and to identify liquids as they move past a scanner. Los Alamos National Laboratory is developing magnetic resonance imaging (MRI) technology to screen liquids, under a project called SENSIT. Here again, the idea is to allow agents watching a screen to detect liquids that are dangerous, based on their chemical makeup. Both T-rays and MRI devices are still in the laboratory stage.

I'm also curious what DHS Secretary Michael Chertoff may be announcing soon. He told USA Today last month that the agency (parent of TSA) is "undertaking a sweeping review of airport security screening to try to ease passenger hassles." The review was supposed to take 30 to 45 days from the March 3 announcement, so it ought to be nearing completion as you read this.

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Next Steps on Runway Incursions

Runway incursions continue to plague many airports, and reducing this hazard is one of the top priorities of the National Transportation Safety Board. Three technologies can help, but are a long way from widespread use.

The first is as simple as giving pilots a device in the cockpit that shows them where they really are on the airfield. One of the capabilities of current Class 2 "electronic flight bags"-a kind of laptop that replaces numerous paper charts and manuals-is a moving-map display of airports, showing the pilot the "own-ship position" at the center of a depiction of the runways and taxiways. Continental and Air Canada are retrofitting many of their planes with such EFBs using Jeppeson moving-map software. (Newer planes, like Boeing's 787, will come with more-advanced Class 3 EFBs installed.) Jeppeson's Rick Ellerbrock told Aviation Week that this system could cut in half the 55% of serious (Class A and B) runway incursions caused by the pilot moving the plane to the wrong location.

The second type of system is runway status lights (RSL). It's a series of red lights installed in the pavements of runways and taxiways, controlled by a computer using inputs from airport surveillance radar. The lights turn red when a runway is occupied, warning the pilot not to enter. The first serious RSL demonstration took place at DFW Airport from 2002 to 2005, and a report by the DOT Inspector General's Office says they performed "extremely well." Incursions decreased by 70%, and the system "met or exceeded all performance criteria set by the FAA." A similar system has been installed at San Diego. But why not elsewhere?

The FAA issued an RFP last month for a national RSL rollout to 20 airports, with a contractor expected to be selected by mid-summer. But apparently the plan will be limited to airports which have or are on the schedule to get the advanced ASDE-X airport surveillance radar. That's a great technology, but the FAA has been agonizingly slow getting it installed at the 35 major airports in the current program. While the first one went into Milwaukee in 2002 and was fully operational by late 2003, about half are still to be delivered to airports, and-once delivered--it's taken an average of 22.6 months to get them fully operational. Yet the DFW program demonstrated that earlier-generation airport surveillance radar was sufficient for the RSL task, so it's hard to see why airports with major runway incursion problems like LAX (whose ASDE-X is still far from operational) or Boston (which still hasn't gotten ASDE-X) should have to wait.

The third technology to prevent runway incursions is ASDE-X itself. The overall game plan is to equip all airport ground vehicles with transponders (like planes have), so that ASDE-X can keep track of everything that moves, which would address the full range of incursions. But the big flaw is that ASDE-X as it's being installed today warns only the controller in the tower-who must then use voice radio to warn the pilot of an impending collision that may be only seconds away. The NTSB has been harping on this for years, arguing that the delays in communication and reaction time could undercut the goal of preventing incursions. I reported in ATC Reform News (No. 49, January 2008) that Honeywell and ASDE-X producer Sensis Corp. have demonstrated a system that sends the warning directly to the cockpit via the transponder used for the collision-avoidance system (TCAS) that's on all commercial and business-jet aircraft. All it takes is a software mod ification to the ASDE-X and TCAS units. But I've seen no sign of FAA moving to incorporate this life-saving innovation into their runway incursion plans.

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News Notes

NZ Airport Offer Rejected. The on-again/off-again deal under which the Canada Pension Plan Investment Board was to purchase a 40% stake in Auckland International Airport is off again-apparently for good. After the airport board had finally given a green light, its offer was approved by nearly 58% of voting shareholders. But last week the government exercised its veto power over the $1.4 billion offer, stating that the deal "would be of no particular benefit to New Zealand." It failed all nine of the recently adopted tests for foreign investment in key infrastructure, including creating or retaining jobs, boosting exports, and providing additional investments. Shares in Auckland Airport fell 10% following the announcement.

Important New Book. Over the years I've learned a lot about aviation economics and policy by reading what U.K. economist David Starkie has written. He's just come out with a new book, compiling 17 of his best papers. Aviation Markets is published by Ashgate, and the paperback edition costs £25, or about $50 (Amazon lists the hardcover for $115). The five sections of the book cover airline competition, airport privatization, economic regulation, airport competition, and infrastructure access. More details from the publisher: ashgate@bookpoint.co.uk.

Change of Command at ACI. Congratulations to Angela Gittens, who's been appointed Director General of Airports Council International-World, headquartered in Geneva. She's held top positions at Miami, Atlanta, and San Francisco airports, and has recently been VP of Airport Business Services at HNTB Corporation. And thanks for many years of leadership to Bob Aaronson, who will be handing over the reins to Gittens.

Two Different Answers Re Carbon Emissions. I was pleased to hear Dan Elwell (FAA Assistant Administrator for Policy, Planning and Environment) tell reporters that U.S. aviation can grow without increasing greenhouse gas emissions. FAA analysis suggests that despite projected air traffic growth of 4% per year, more direct routings and other changes from NextGen, plus fleet replacements, should reduce greenhouse gas emissions by about 3.5% per year; the 0.5% gap could be filled as biofuels come to market. Not so fast, argues Greenpeace's chief scientist. In a recent opinion piece (Airline Business, April 2008), Doug Parr rejects biofuels and declares flatly, "Stopping the seemingly relentless growth of flights and airport capacity at present seems the only viable option." Just so you know what we're up against.

Addendum re International Registered Traveler. A reader emailed in response to last issue's report to tell me that NEXUS (which I'd mentioned as an existing risk-based border-crossing program) has 170,000 members and is now active at all the Canadian airports I'd mentioned. Canada also now recognizes the APEC card, as of January 2008. And Customs & Border Protection has indicated the APEC card will be interoperable with their new International RT program at some point.

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Quotable Quote

"Airlines are often enthusiastic in their support of caps at airports they already serve. When a cap is established, incumbents are protected because they typically maintain their market share, and the potential for new competition is diminished. The legacy airlines' support for such a policy makes sense, because limited competition makes them more profitable and protects them from new entrants that might want to compete by offering lower fares. Although caps protect existing airline business, they also prevent airlines from adding capacity at an airport unless they are able to obtain a slot from a competitor. As a result, one of the best-known problems with slots is that they encourage airlines to "baby-sit" slots, i.e., underutilize the slot by flying multiple small aircraft into an airport to maximize the number of slots an airline can occupy at the lowest possible cost. As a result, slots do not always go to those who value them the most and who wil l use the capacity in the most efficient manner."
--D.J. Gribbin, General Counsel, U.S. DOT, testimony before the House Aviation Subcommittee, April 9, 2008.

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Airport Policy and Security Newsletter #33

bob.poole@reason.org (Robert Poole) — Fri, 14 Mar 2008 00:00:00 EDT

In this issue:

Expanding airports via technology
Midway privatization a "go"
Registered Traveler keeps expanding
Hypocrisy on airport grants
Going beyond weight-based landing charges
More outsourced airport screening
News notes

Increasing Airport Capacity via Technology

Epic battles have been fought over airport expansion in recent years. Airport operators eventually won long, drawn-out, costly battles with adjacent property owners in Seattle and St. Louis, but lost to airport neighbors and environmentalists over expanding SFO into San Francisco Bay. Since opportunities to create whole new airports in the major metro areas where more capacity is needed most are very few, wouldn't it be great if there were a way to expand the capacity of existing airports—without having to buy up large swathes of costly, occupied adjacent real estate?

About 18 months ago, as I got deeper into the Joint Planning & Development Office's planning for NextGen, the portions relating to airports made quite an impression. I discussed this with long-time colleague Viggo Butler, former president of Lockheed Air Terminal and its successor company, Airport Group International. Thanks to a grant from the Walker Foundation, we commissioned Viggo to look into this idea in more detail. He visited with the relevant agencies in Washington, DC as well as several airports where runway capacity is a big problem—SFO, the Port Authority of New York and New Jersey, and SEA-TAC, as well as some of the leading-edge companies pioneering NextGen capabilities. The resulting policy study, "Increasing Airport Capacity without Increasing Airport Size," has just been published. (www.reason.org/ps368.pdf)

In this report, Viggo reviews an array of NextGen technologies and capabilities—RNP, ADS-B, WAAS, CDAs, etc., as well as various recent technical studies, by the JPDO and others. The encouraging results are that alone and in combination, these tools can significantly increase the capacity of key airports. One of the study's most dramatic proposals is to add a closely spaced parallel runway at JFK. Full implementation of ADS-B and cockpit synthetic vision would permit safe operation of closely spaced parallel runways—even those 750 feet apart like those at SFO—in low-visibility conditions. Just RNP alone could provide capacity increases of between 16% and 54% at 12 key airports.

Our point in putting out this study is that since airport capacity expansion projects (especially runway additions) can take 10 to 20 years at large airports, airport planners should start factoring NextGen capabilities into their planning studies now. This is the time horizon over which—if all goes well—NextGen capabilities will be making their way into the ATC system and into the aviation fleet. And the impact of NextGen on airport capacity is a good reason for the airport community to get more involved as stakeholders, pressing for policy changes needed to ensure timely implementation decisions and institutional changes needed to get this crucial job done.

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Midway Privatization Now Looks Likely

The other shoe dropped regarding Midway Airport privatization in mid-February. The city of Chicago announced on Feb. 13th that it had reached agreement with four more airlines to support its competition to lease the airport to a private operator. Signing on were Delta, AirTran, ATA, and Frontier. Together with original signer Southwest, the five represent 70% of the carriers and 95% of the airport's traffic. That meets the requirements of the federal Airport Privatization Pilot Program that at least 65% of the carriers, and also carriers representing at least 65% of the annual landed weight, support the plan.

Having met this test, the city released its request for qualifications (RFQ) for companies or teams interested in competing for the long-term lease under the terms agreed to by the airlines. Responses to the RFQ are due by March 31, 2008. Media reports have already indicated that the parent company of BAA—Grupo Ferrovial—will be leading one team, and another will be led by Macquarie Airports. Aviation Daily reports that the Canada Pension Plan Investment Board is also interested in Midway.

The general outline of the deal offers the airlines predictable rates and charges for at least the initial 25 years of the lease (which is expected to be 50 years or more); the lease terms would thus change from the current residual-cost basis to the more commercial approach called "compensatory." Airlines would have veto power over capital projects that would be funded by airline charges, but not others funded by commercial revenues. The city is also requiring a no-layoff guarantee for all current airport employees, all of whom will be offered city jobs at comparable levels of pay and benefits or comparable jobs, pay, and benefits working for the new airport operator. What is not clear from the RFQ is who will control the airport's 43 gates. Currently, only eight are common-use, with the majority controlled under exclusive-use leases by Southwest. Often (but not always) when an airport is privatized, the airport company shifts gates to common-use so th at it can maximize their utilization. That could make a difference in the operator's revenue—and hence in the amount bidders will offer.

On that question, I'm still skeptical that the city will realize anything like the widely mentioned $3 billion figure for a 50-year lease. Why? Because Midway appears to have little potential for growth, either in passenger throughput or more intensive land usage. Perhaps there's a lot of fat that can be cut out of operating costs. And there is the interesting point that the city plans to use a portion of its proceeds to pay off the airport's current $1.2 billion in outstanding bonds. That eliminates $50 million per year in debt service—though presumably the winning bidder will borrow a large portion of its up-front lease payment and therefore have new debt-service obligations.

Still, my view is that if airport companies and infrastructure funds are willing to pay $2-3 billion to lease Midway for 50 years, we should see significantly larger valuations for airports with much better growth prospects. So a successful privatization of Midway would be a bellwether transaction, analogous to Mayor Daley's January 2005 lease of the Chicago Skyway. That deal signaled to the global capital markets that U.S. toll roads were an attractive investment opportunity—and highway finance has been dramatically different ever since.

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Registered Traveler Keeps Expanding

The good news is that as of this month, 17 large and medium-size airports offer the Registered Traveler option, whereby members of any of the three TSA-approved programs (market leader Clear, Unisys/FLO, and Vigilant) can bypass long security lines upon presenting their biometric card at a kiosk adjacent to the checkpoint. The most recent additions include Denver, Oakland, and both Reagan National and Dulles Airports in Washington, DC. But I will caution you that not all checkpoints at participating airports are equipped. Earlier this month I arrived at LaGuardia's Central Terminal hoping to catch an earlier American flight, only to encounter one of the longest checkpoint lines I've ever seen. It turns out that concourse does not yet have a Clear kiosk, and the Clear staffers at the adjacent concourse suggested that I pester the airport authority to speed its installation.

In the current competition between FLO and Clear to become Atlanta's RT provider, Clear has offered to finance and install an entire new lane for RT members if it wins the bid—and to pay for the cost of any additional TSA screeners needed to staff it. CEO Steven Brill says the company is willing to do the same at any airport where demand is high enough to warrant a separate lane.

Clear has also announced a $500K Innovation Prize for airport security technology that could speed RT members through security lanes—e.g., by getting TSA approval to not have to remove shoes, coats, or laptops. Because GE is an equity investor in Clear, and its shoe scanner is already in TSA testing for deployment, GE will not be eligible for the prize.

For several years there has been a tenuous relationship between RT providers and the TSA, ever since the agency decided that RT—contrary to the original concept—is not a security measure (separating out lower-risk travelers) but merely a passenger convenience for those willing to pay for it. But in a January 7th interview with Aviation Week, TSA head Kip Hawley suggested that the private sector might step forward with "a private sector background check, such as you use in the financial services industry. That would give us the basis for changing our security measures for people with a Registered Traveler card." Which suggests that the original concept still has adherents within TSA.

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Hypocrisy on Airport Grant Program

There was an old joke in the Soviet Union along the lines of "We pretend to work and they pretend to pay us." Everyone knew that many of the USSR's factories were actually value-subtracting enterprises (i.e., the value of what came out the door was less than the value of the inputs used to create it). But it was convenient to maintain the fiction that these were actual businesses, like those in the West.

I'm reminded of this by some of the recent rhetoric in support of ever-larger sums for the federal airport grant program, AIP. It's beloved by members of Congress for obvious reasons. As with the highway and transit program, members love the opportunity to issue press releases telling the grateful aviators and chamber of commerce members in Podunk about the wonderful $100K they have secured for the local airport. Like an ever-rising fraction of the highway and transit program, a large portion of AIP is essentially an old-fashioned public works program, in which Congress pretends to make strategic investments in vital infrastructure and the airport community goes along with the charade. After all, it's free federal money, isn't it?

Let me hasten to add that I'm not talking here about large, medium, and small hub airports. Remember that the lion's share of the funding for AIP comes from ticket taxes paid by airline passengers using those airports. In one of my earliest Reason Foundation airport studies, back in 1990, I crunched the numbers for the 10 largest air carrier airports, comparing the estimated ticket tax revenues generated at each with the amount of AIP entitlement grants it received. The average "return" was 14.8%, with the lowest being SFO (9.5%) and the highest JFK (20.8%). My point was simply that as a mechanism for strategic investment, the system "allocates airport grant funds according to a politically negotiated formula which redistributes large sums from the major airports (where most of the ticket tax collections originate) to hundreds of smaller commercial airports and thousands of GA airports. Thus, the system reallocates capital funds from those places where the needs are most pressing to other locations whose needs are nowhere near as great." That description still applies, 18 years later.

Yet listen to the rhetoric used to support an ever larger AIP budget. Aviation Daily (Feb. 8, 2008) cited Rep. Jerry Costello (D, IL) saying that "AIP funds are crucial to combat congestion and delays . . . . In order to combat congestion and delays, the country needs to add more capacity at airports, particularly by building new runways, he said. ‘The only way to do that is through the AIP program.'"

What a hoot! The problem of congestion and delays is confined to a few dozen large and medium hub airports—precisely the ones that get the worst deal out of AIP. About $1 billion in AIP funding goes to GA airports that have no commercial service, most of which don't even bother to charge landing fees (so don't tell me they have no alternative to AIP). Yes, a few of these are reliever airports that do play a key role in offering GA planes an attractive alternative to congested hub airports. But the large majority of those airports have no role whatsoever in helping reduce congestion and delays.

I've been around politics and public policy long enough to expect politicians to play these games. They can't very well announce that they need a $4 billion AIP in order that every member gets to announce airport grants in his district. But why do aviation professionals go along with this hypocrisy? And why should working families be taxed on their airline trips so that Congress members can continue to play these games? We need more investment in airport capacity—not as public works handouts but as strategic investments. But a common pool with 535 drinking straws is not a rational way to go about making strategic investments.

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Going Beyond Weight-Based Landing Fees

Debate continues between airport and airline trade groups, over the U.S. DOT's proposed changes to its airport rates and charges policy that would make clear that airports can charge for runway use per operation, in addition to or instead of by aircraft weight. While both IATA and ATA have criticized the proposal, it's being defended by the leading airport trade group, Airports Council International–North America. Deborah McElroy, ACI-NA's executive vice president for policy and external affairs, told Aviation Week (Jan. 21, 2008) that "Peak pricing is a legal instrument that some airports have employed to neutralize congestion." She pointed out that basing a landing fee on a per-operation basis does not violate standards set by the International Civil Aviation Organization (ICAO) and will not change the negotiations that take place between airlines and airport that set actual fee structures at airports.

While comments are being submitted to the DOT docket, the privatized operator of London Heathrow, BAA, last month announced that it was replacing weight-based landing charges with flat per-operation charges. That move was quickly denounced by airlines that complained it would hit hard at feeder flights to LHR international flights. While it would raise the relative cost per passenger for such flights, it would also create incentives for feeder operators to up-gauge those flights, trading off larger seating capacity for frequency of service, thereby reducing congestion. The U.K. Civil Aviation Authority said it has no jurisdiction over the details of airport runway charging structures.

Incidentally, the comment period for the U.S. DOT's proposed policy changes has been extended to April 3rd.

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More Outsourced Airport Screening

Although it has just about disappeared from major media radar screens, the opt-out program for airport passenger and baggage screening is alive and well—though still very small. Last month the 10th and 11th opt-out airports were announced by TSA. FirstLine Transportation Security won an initial one-year contract to provide passenger and baggage screening at the Gallup and Roswell airports in New Mexico. The contract is valued at $1.2 million.

Under the 2001 Aviation and Transportation Security Act, following an initial five-airport pilot program for opt-out security screening, all air carrier airports were given the option to do likewise. The opt-out program is called the Screening Partnership Program (SPP) by TSA. Besides the original five pilot program airports (SFO, Kansas City, Rochester, Jackson Hole, and Tupelo), the other current SPP participants include Sioux Falls, Key West, Sonoma County (CA), and the E. 34th Street Heliport in Manhattan.

I had predicted that many airports would shift from TSA to private contractors, based on the good results achieved at airports of all sizes under the pilot program. Obviously, I was wrong about that. What seems to be the case is that once a way of providing screening services has been established at an airport, nobody is eager to change it. Thus, while airports have not been dumping TSA in favor of private contractors (Key West was a special case), neither have any of the opt-out airports decided to shift over to TSA. And at all but Key West, the new SPP airports have been ones where scheduled passenger service has been newly established. Given TSA's congressionally imposed cap on its screener head-count, it serves its own interests that new airports get their screening from TSA-approved contractors.

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News Notes

Destroying Shoulder-Fired Missiles. It's encouraging to learn that since 2003, more than 24,000 shoulder-fired anti-aircraft missiles (known as MANPADS) have been acquired and destroyed. At least that is the claim made by the State Department, which has an active program to do this, working with 22 countries, from Afghanistan to Nicaragua. (Aviation Daily, Jan. 28, 2008). I haven't seen any cost figures on this program, but my guess is that this is a lot more cost-effective than spending tens of billions to equip all U.S. commercial airliners with anti-MANPADS systems.

More Low-Cost Airline Terminals. Last issue I reported on the controversy over Austin-Bergstrom Airport's plan to develop a no-frills terminal specifically for low-cost carriers who opt to use it. As context, I noted that this is a global trend, citing a number of examples, some of which have already gone into operation. Since then, word has reached me of two more such projects. Brussels Airport this month announced plans to refit a currently unused terminal building as a no-frills terminal, at a cost of E20 million, due to open by April 2009. And a UK company, Meinl Airports International, announced plans to build an entire low-cost airport near Warsaw, Poland, at a cost of $307 million. Target date for opening is 2011.

New Zealand Sale Back On? Last issue I reported that the previously announced offer by the Canada Pension Plan Investment Board for 40% of Auckland International Airport (AIA) had been rejected. But the airport company in late February advised investors to sell their shares to CPPIB, since the deal looks much better following a recent sharp decline in the price of AIA shares to 20% below what CPPIB has offered. Macquarie Equities was quoted in the local media as saying "This is the only offer they've got on the table, and the value gap between the share price and the offer price has opened up very, very significantly." For the partial takeover to succeed, CPPB must acquire the full 40% held by retail investors and also get a majority approval of shareholders who vote. Institutional investors hold 30% of AIA, with the remaining 23% held by two local councils.

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