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Air Traffic Control Reform Newsletter #70

Paying for air traffic during economic downturns and user fees

Robert Poole
February 28, 2010

 In this issue:

Low-Cost ADS-B Developed by MITRE

One of the key concepts in NextGen is the replacement of costly ground-based surveillance (such as secondary surveillance radars) with more-accurate GPS-derived position information. That's the purpose of ADS-B, whose implementation is under way by the Air Traffic Organization. But because ADS-B is a form of "cooperative" surveillance, it will only work effectively in a given chunk of airspace if every aircraft flying in that space is equipped. And because even the basic transmit-only version currently costs more than $5,000 (plus installation), getting all general aviation planes equipped poses a real cost challenge.

That's why some pioneering work at MITRE Corporation is so important. Last year a glider pilot who reads this newsletter sent me a 2007 paper from MITRE discussing the development of a prototype low-cost ADS-B unit for small unmanned aerial systems (UAS). If that type of vehicle is to operate in controlled airspace in an ADS-B world, it will need to be equipped. But since a UAS may be quite small and light, the ADS-B unit must likewise be small and light, and have minimal power requirements. At the end of the 2007 paper, the authors mentioned possible future applications to small manned aircraft without electrical systems, such as gliders.

Last month I contacted one of the MITRE engineers, Rob Strain, and quizzed him about this project. He sent me a 2009 paper that reported on test flights with the early transmit-only UAT Beacon Radio (UBR) prototype and the development of a more advanced version. The initial UBR-TX is transmit-only; it contains an ADS-B transmitter, a GPS receiver, a pressure-altitude sensor, and a battery pack using 4 AA lithium batteries. This unit has been test-flown on both UASs and on a manned Piper Lance light aircraft. The paper also previews the UBR-TVR, which adds an ADS-B receiver, so as to be ADS-B/In capable. That device began testing last year.

Now for the caveats. Both devices use largely commercial parts (non-FAA-certified) to keep the materials cost low. The UBR-TX parts cost is estimated at $175 and that of UBR-TVR at around $400, in lots of 1,000. There would be significant additional one-time engineering, fabrication, and testing costs-and that's prior to the costs that would be incurred to gain FAA certification.

But the good news is that as a non-profit federally sponsored research center, MITRE offers non-exclusive licenses to technologies such as this, for a nominal one-time charge. Strain told me that several firms have already licensed this technology, and he thinks that competition could significantly drive down the eventual cost to aircraft owners.

Two things that could really help bring about truly low-cost ADS-B for small aircraft (manned and unmanned) are a cooperative approach from FAA towards certification and very large-volume purchases. The latter is the kind of deal that a commercialized Air Traffic Organization would be far better placed to work out than the current ATO that's embedded in a tax-funded government agency.

"Implementation Considerations for Automatic Dependent Surveillance-Broadcast on Unmanned Aircraft Systems," J. Chris Moody and Robert C. Strain, MITRE Corporation, 2009, (aiaa.org/preview/CDReadyMIA09_2070/PV2009_1865.pdf)

Paying for ATC During Economic Downturns

The global economic recession, which has been especially severe in aviation, has led to an ongoing clash between airlines and air navigation service providers (ANSPs) around the world. Last November the airline trade group IATA unleashed a blast at proposed 2010 en-route rate increases in 19 of 34 Eurocontrol member states (averaging 2.7%). Its Nov. 24 statement criticized "out of control monopolists completely divorced from reality" for "proposing increases in the middle of an unprecedented industry crisis."

It's true that under the fairly rigid cost-recovery principle used by European governments to regulate ATC charges, ANSPs are supposed to be self-supporting from fees and charges each and every year. Thus, when air traffic falls, and with it ANSP revenue, there is a natural tendency to increase the unit rate to make up the shortfall. IATA and individual airlines argue that ANSPs should focus on cutting costs, not increasing rates, during downturns. And indeed, most ANSPs have been doing that, which accounts for the fact that of the 34 ANSPs in Eurocontrol, eight have frozen their rates for 2010 and seven have announced rate reductions.

CANSO, the ANSP trade association, is arguing for changes to the cost-recovery system. Outgoing Secretary General Alexander ter Kuile said IATA's comments "confirm CANSO's belief that the cost recovery system, which is not designed to cope in times of crisis, needs urgent reform."

It amazes me that with aviation having suffered through two recessions since 2001, only one ANSP has come up with a solution to this problem. Since its inception, Nav Canada has maintained a reserve fund to help it and its customers get through economic downturns without rate increases. It's called the Rate Stabilization Account (RSA). In good years, when revenues exceed expenses, Nav Canada uses some of the surplus to build up the balance in this account, with a target level of 7.5% of total operating costs. The account acts as a kind of buffer, which the company can draw on during downturns to supplement its operating budget, reducing or eliminating the need to increase rates.

At my request, Nav Canada sent me a graph showing the balance in the RSA from 2000 through the first quarter of its 2010 financial year. Just before the 9/11 attack, the balance was $75 million; the company drew down all of that in the subsequent three-year period, but still had to implement modest rate increases from 2002 to 2004. But since then, the balance has been built back up, and Nav Canada was able to decrease rates in both 2006 and 2007. Despite the 2008-09 downturn, no rate increases have been necessary, thanks to a combination of cost reductions and the RSA. For the first quarter of financial year 2010 (Sept-Nov 2009), the company suffered a modest operating loss ($6 million) due to traffic that was 5.7% lower than in the prior year. But so far, the RSA is enabling the company to hold the line on rates.

Nav Canada's approach has stood the test of time. I think CANSO should embrace this idea as its core proposal for reform of European ANSP cost-recovery regulation.

Two Cheers for the Administration's ATC User Fee Decision

"User Fees Axed from FAA's FY2011 Budget," read the headline in Aviation Daily on Feb. 2nd. The thrust of the story was that the brief language from last year's federal budget proposal, calling for replacing aviation excise taxes with ATC user fees as of FY 2011, was absent from this year's FY2011 budget proposal. The news was cheered by general aviation organizations AOPA, GAMA, and NBAA, all of which had devoted considerable attention over the past year to opposing the idea.

Though I have long advocated that ANSPs be paid directly by their customers, I have to say that I consider the administration's decision to be wise. I know that may shock many long-time readers, but hear me out. What I advocate is major governance and funding reform of air traffic control-not a switch from one form of taxation to another. Rest assured, what the administration's Office of Management & Budget was talking about in its footnote last year was not any sort of governance reform. The "fees" they proposed would have simply replaced aviation excise taxes (largely on tickets and fuel) with ATC taxes (probably based on distance flown).

But they would still have been taxes. The monies would be paid to the U.S. Treasury, and appropriated annually for the FAA budget in whatever amounts Congress saw fit to select. If (as intended) taxes based on flight activity tracked better with FAA costs, that might somewhat beef up the FAA's funding, but would do nothing to improve its performance or cost-effectiveness. Some have called this "feeding the beast." So to the extent that general aviation groups opposed this largely cosmetic change in the mode of taxation, I'm with them.

Now that this issue can be put to one side, I hope we can start having serious discussions about governance reform. NextGen will require large-scale coordination of investments between a diverse group of aviation customers and the Air Traffic Organization. Both the ATO and each aviation segment must have confidence that the other party will make good on its commitment to invest in its portion of key NextGen technologies-and that there is a solid business case for each piece. That process would work far better if the ATO were being run in the interests of its customers-e.g., by a board of directors representing all segments of aviation. If the ATO were to become a separate modal administration within DOT, headed by a CEO/Administrator working with a stakeholder board of directors, it would be a whole new ball game.

Major U.K. Facility Consolidation

On February 9th Princess Anne formally opened the new NATS en-route control center in Prestwick, Scotland (in Ayrshire, near Glasgow). That action completes a major facility consolidation launched 10 years ago, reducing the number of NATS en-route centers from four to two. Similar facility consolidations have taken place in Australia, Canada, and Germany as commercialized ANSPs replace older facilities with larger and more flexible modern ones. Consolidation facilitates a shift from fixed ATC sectors to flexible ones, able to be adjusted on both a tactical (short-term) and strategic (longer-term) basis, to accommodate changing traffic patterns and densities. It is one of the keys to greatly increased productivity, as various forms of automation permit each controller to manage a larger total amount of traffic, wherever needed.

Facility consolidation means some people have to move. In the case of Prestwick,  some of the 800 now employed there had moved from other facilities in recent years, and the last move involved 130 controllers from Manchester, which will be shut down later this year. Some people welcome a move, especially if it's to a place with a lower cost of living and perhaps better quality of life; others invariably prefer the status quo. One thing NATS did not have to contend with was members of Parliament trying to protect local jobs in Manchester. Once the U.K. government commercialized NATS, decisions on facilities and equipment became business decisions, not political ones.

Prestwick handles 42% of U.K. air traffic (about 900,000 flights per year), including all traffic to and from the North Atlantic. It controls more total airspace than any other center in Europe. It's been designed to handle the European version of NextGen, and will soon replace paper flight strips with Electronic Flight Data. The facility itself has two separate sources of purchased electricity, backed up by stand-by generators and a battery system. The control room is shielded, amounting to a giant Faraday cage, to prevent electronic interference. Each controller workstation has two terminals, supplied by different power sources.

In this country, the Air Traffic Organization has 191 centers and TRACONs, many of them aging and in need of replacement. Quite a few of them are in areas with very expensive land and high living costs. With NextGen getting under way, it would be foolish to replace all of these facilities one for one. Yet unless we can figure out a way to de-politicize facility consolidation, that's unfortunately the most likely outcome.

Reforming Spain's High-Cost ANSP

Earlier this month, Spanish air traffic controllers began protesting the government's publication of a decree providing a new legal framework for air navigation services in Spain. The decree, issued Feb. 5th, was in response to increasing concerns by airlines and passengers over the high cost of flying in Spain. Over my years of reading Eurocontrol performance reviews of European ANSPs, one has always stood out for its high costs and low productivity: AENA, the Spanish provider. The 2008 Performance Review Report ranks AENA highest in Europe in terms of cost per controller hour and third-highest in cost per composite (gate-to-gate) flight hour.

Thus, when AENA announced a planned rate increase for 2010, the airlines declared war. IATA Director Giovanni Bisignani said that "Over the last decade, Spanish air traffic costs have tripled. They are now the most expensive en-route air navigation charge in Europe." In January, transport minister Jose Blanco announced that the government would freeze AENA's rates for 2010 and address the company's inherent inefficiencies. An article in the U.K. tabloid The Daily Mail claimed that the average AENA controller took home €200,000 last year, while 10 received between €810,000 and €900,000 and another 226 got between €450,000 and €540,000. The majority of these sums are overtime pay, suggesting fundamental management problems at AENA.

The government's Royal Decree does a number of things. First, it sets up a three-year interim regime governing the working conditions of controllers (pending the negotiation of a new bargaining agreement-a process that has been underway since 2005). It will increase the amount of ordinary hours and reduce the amount of overtime. To address the evident shortage of controllers, the decree calls for two major liberalizations. First, controller recruitment and training will now explicitly take into account prior ATC experience and knowledge, and private firms will be allowed to do training. Second, the provision of control tower services will be deregulated (as it has long been in the U.K.), allowing the entry of certified ATC firms into that segment of the market.

I hope these measures will lead to a revamp of AENA management and the creation of a new corporate culture that is fair to employees while bringing the company's costs back into line with the rest of Europe's.

Will "Best-Equipped, Best-Served" Fly?

The chicken-or-egg problem of "equipage" for NextGen is very real, and I've written about it a number of times in this newsletter. The clever people at the Joint Planning & Development Office who have thought up the key concepts that comprise NextGen have a proposed solution. It's called Best-Equipped, Best-Served (BEBS). This concept of operations calls for giving priority to those aircraft equipped with various NextGen capabilities over those that are not so equipped. Hence, there would be tangible benefits, not 15 years from now when everyone is equipped, but right from day one.

Mike Harrison devoted his editorial in the Fall 2009 issue of The Journal of Air Traffic Control to explaining how BEBS might work. For example, planes equipped for RNP 0.1 (able to maintain a desired flight track to within 0.1 n.mi.) would be given a continuous descent arrival whenever they requested one, and other traffic, if necessary, would be vectored out of the way. Aircraft equipped with a data link integrated with its flight management system (FMS) computer would be able to accept clearances and changed flight plans automatically, reducing controller workload and hence saving the system money. Again, they would get unconstrained flight track clearances, which other aircraft would be managed to accommodate. Datalink-equipped planes could also be released first from gate holds. Aircraft equipped with ADS-B could use both of a pair of closely spaced parallel runways in non-visual conditions, but others could not. And so forth.

I think those incentives might well spur faster equipage. And as Harrison points out, there are precedents. When instrument landing systems (ILSs) were first installed, "aircraft that equipped were able to land in lower visibilities while others needed to go to their alternate airport." Likewise, heads-up displays and enhanced vision allow for departures and landings at lower minimums. Yet today's ATC system operates almost entirely on a first-come, first-served basis in which all aircraft are treated as interchangeable units, regardless of capabilities. It will require a significant cultural change, if you will, to shift from this to BEBS.

Fundamentally, two different concepts of fairness are involved in this choice. The egalitarian version of fairness would insist that all planes be handled equally. We see this in surface transportation in the egalitarian opposition to HOT lanes and express toll lanes that let those who buy a transponder and are willing to pay get faster, uncongested trips. The alternative concept of fairness says we should reward those who, at their own expense, equip their planes to take advantage of the new system capacities, thereby speeding up the transition to a more cost-effective and higher-capacity system.

This may be another case where a politicized system would lean towards the egalitarian version, while a commercialized system would opt to reward those who invest. Which model do you prefer?

News Notes

MITRE Engineers Win AIAA Award

Four MITRE Corporation engineers received the 2009 Digital Avionics Award from the American Institute of Aeronautics and Astronautics in December. Chris Moody, Doyle Peed, Robert Strain, and Warren Wilson received the award for the invention and development of the Universal Access Transceiver (UAT) and the UAT Beacon Radio, low-cost collision avoidance tools for unmanned aircraft and light general aviation aircraft. (This technology is discussed further in the lead story in this issue.)

New CANSO Member from Middle East.

In November, the General Civil Aviation Authority (GCAA) of the United Arab Emirates joined CANSO as a full member. GCAA operates the UAE's air traffic control system, and CANSO (Civil Air Navigation Services Organization) is the global trade association for ANSPs.

Feedback on Controllers in Northwest Incident

I made an error in my report about controller fatigue and the Northwest Airlines overflight incident, last issue. I wrote, incorrectly, that controllers are supposed to notify NORAD within 10 minutes of loss of contact; in fact, it is supervisors who are supposed to do that. Also, in fairness to the controllers involved, I should have noted the diligent efforts of controllers at both Denver and Minneapolis Centers to contact the plane and to track it down.

New CANSO Director General

After nine years of service, Alexander ter Kuile stepped down as Secretary General of CANSO last fall. Taking over is Graham Lake, whose title will be Director General. Lake comes to the position with 30+ years of aviation experience, at ARINC, SERCO, and SITA, among others. His ATC career began as a controller at NATS, the UK's ANSP. Prior to taking the CANSO position, Lake was chairman of Micronav and managing partner of Aviation Management Solutions and Services.

Obstacle to Contract Towers Removed

In December a federal court dismissed a lawsuit challenging the FAA's decision to outsource the management of VFR control towers. Filed by controllers union NATCA, the case had dragged on for 15 years and had the effect of preventing expansion of the successful Contract Tower Program (except for new towers). The Dec. 11 ruling found that neither NATCA nor any individual plaintiff could be harmed by re-competing contracts for towers already being operated by the private sector. Hence, NATCA no longer had sufficient connection with the subject to remain a party to the suit. There are currently 245 control towers in the program, handling about 25% of all U.S. tower operations.

Quotable Quotes

"Some hub airports are being drawn down significantly, and some cities have lost hub status in recent years. The FAA in most cases had invested significantly in facilities at these locations, and are now 'way oversized [compared to] current traffic levels,' [said ATO Chief Operating Officer Hank Krakowski]. Good examples are St. Louis, Cincinnati, and Pittsburgh. Military flight activity is also shifting due to base closures. As industry business models evolve, the [ATO] is forced to make changes in a 'hard-wired' infrastructure, many of which are difficult or impossible to reverse. Looking to the future, it is impossible to know where major hubs are going to be, and to plan appropriately, Krakowski said. The NextGen modernization plan gives [the ATO] the opportunity to build an ATC system that is 'scalable, flexible, and easily upgradable,' Krakowski said. This will enable it to adjust to any industry trends. . . . However, Krakowski also stressed that the [ATO] faces other obstacles to adjusting the infrastructure. He noted that the agency is often blocked by political and local considerations."

--Adrian Schofield, "FAA Needs More Flexible ATM System, Krakowski Says," Aviation Daily, March 19, 2009.

"While user fees continue to be collected from aviation sources [ticket tax, waybill tax, aviation gas tax], the money still goes into the same, segregated Aviation Trust Fund and is only dispensed to the FAA after the same tortured allocation and appropriation processes that have always been followed. From my standpoint, the only reason this practice continues is to allow the Executive and Legislative branches of our government the freedom to steer budgets and policies to their liking, irrespective of stakeholder or ATO priorities."

--Frank L. Frisbie, "FAA-The Fox or the Farmer, The Journal of Air Traffic Control, Fall 2009.

"Given that [value of service pricing] is industry practice, why is this controversial for an ANSP? This is where another misunderstood issue comes into play, that of cost recovery. The cost recovery philosophy has been crucial at ICAO to encourage countries to develop financially independent entities for [air navigation services], but some customers have argued that this principle must be applied to every flight individually. They argue that since the cost does not change percerptibly for the ANSP, all aircraft should pay the same fee for a given flight, no matter the size of the aircraft. However, ANSPs world-wide, with ICAO acceptance, treat cost recovery as meaning that, in total, the ANSP recovers all costs for a given service (e.g., en-route and terminal). They then distribute this among users, most using the weight factor as a form of capturing the value of service, i.e., those who derive more value from a flight are asked to pay more."

--Glen McDougall, "Is a Blip Just a Blip? Air Traffic Controller Workload and Revenue Generation," Airneth.com column, November 2009.


Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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