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Reason Foundation

Air Traffic Control Newsletter #111

FAA budget cuts NextGen, spurs commercialization talk, Administration's user tax proposal is DOA, Inspector General and GAO fault FAA on NextGen

Robert Poole
March 19, 2014

In this issue:

FAA Budget Would Cut NextGen, Spurs Talk of Commercialization

The DOT budget proposal for FY 2015 would reduce funding for NextGen by 7.2% from the current year's $901 million to just $836 million. By contrast, it would devote $1.8 billion to "legacy areas to sustain current systems," making a down payment on many billions of dollars of accumulated deferred maintenance on aging staffed and non-staffed facilities. That painful trade-off between patching up legacy systems and investing in 21st-century ones serves to reinforce the growing consensus on the need for ATC funding and governance reform.

That discussion was in full swing at a major session on the subject during the 2014 Annual Meeting of the Transportation Research Board in January. The panel was moderated by Steve Van Beek, who had just completed a term on the FAA Management Advisory Council (MAC). That body last fall unanimously recommended that the Air Traffic Organization be moved out of FAA, given its own (bondable) user-based revenue stream that would not be part of the federal budget, and be governed by a board representing aviation stakeholders.

The panelists all shared their frustration with the status quo, with NATCA President Paul Rinaldi saying that we don't have the luxury of thinking that the status quo is OK any longer, and that sequestration and controller furloughs were a real game-changer for controllers. He added that we need to learn from other ANSPs and figure out what is scalable to our system. Sharon Pinkerton of Airlines for America said she sees the dynamics changing, and that we might really get action on funding and governance reform. She emphasized that the only way to get to yes is serious stakeholder dialog, and she thinks the funding issue is resolvable. She noted that the Aviation Trust Fund already collects more than enough to cover the capital and operating costs of air traffic control, but it cannot be spent effectively under the status quo. When Boeing's David Traynham suggested that governance reform (i.e., a stakeholder board) might be more achievable than funding reform, Van Beek noted that the MAC recommended that the stakeholder board itself develop the schedule of fees and charges.

These discussions (and many more that are going on behind closed doors) were definitely on the mind of Transportation Secretary Anthony Foxx when he made his first major aviation speech, before the Aero Club of Washington on Feb. 25th. In response to what the questioner termed "privatization" (but which we should correct to "corporatization"), Foxx replied:

"I've heard from a variety of stakeholders, and so I know there's a lot of frustration that the political underpinning for our aviation system may be frayed, and folks are looking for some alternatives. My feeling is that we should engage with all of the stakeholders and keep our ears and minds open to new and different ways of doing things. But we're going to also want the stakeholder community to be as united as possible on what the outcome is, so that means labor, it means the carriers . . . it means the manufacturers. Everybody is going to have to engage on the questions, because there's a graveyard of administrations that have tried to make game-changing moves here."

Foxx has clearly done his homework, alluding in particular to the major push by the Clinton/Gore Administration in 1994-95 to create the U.S. Air Traffic Services Corporation (USATS), with user charges and revenue bonding, regulated at arm's length by the FAA. That effort died because it failed to gain the support of the aviation stakeholder community—or the business community. Things appear to be very different this time around.

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Administration's User Tax Proposal Is Dead on Arrival—and Should Be

As it has done every year, the Administration has once again proposed a $100 per flight "user fee" to be deposited in the Aviation Trust Fund. And its budget projections show the revenues from this new source doing two things over the next five years: (1) eliminating the traditional general fund portion of FAA's budget, and (2) ramping up the Trust Fund's unspent balance to a whopping $16.4 billion after five years. This is the opposite of the kind of funding reform we need to get ATC modernization back on track.

First of all, it's an exercise in futility, since Congress has never taken this proposal seriously, especially in the face of overwhelming opposition from airlines, business aviation, and general aviation groups.

Second, despite being described as a "user fee," it is nothing of the kind. It's a user tax. This is not mere quibbling over words. A tax is collected by the government, deposited in the Treasury, and can only be spent if and when the money is appropriated by Congress as part of a multi-year reauthorization bill followed by annual appropriation bills. And what the FAA is allowed to request each year is not what its top management decides is needed but what the Office of Management & Budget will allow. This is the set of factors that holds ATC modernization (aka NextGen) hostage to the broken federal budget process.

A true user fee is what self-supporting air navigation service providers (Airservices Australia, Airways New Zealand, DFS, Nav Canada, NATS, etc.) charge for providing ATC services to their customers. The charges are paid by the customers directly to the ANSP. Use of the revenue is decided by its top management, under policies adopted by its board of directors (which means aviation stakeholders in Canada and the U.K.) And just as with utilities like electricity, gas, water, etc., this kind of revenue stream is bondable. Well-run ANSPs have investment-grade bond ratings. That means they can finance large-scale capital programs like NextGen at reasonable cost, paying off the bonds over time as their customers enjoy the benefits of the new facilities and equipment.

As for the general fund contribution toward the FAA's $15.5 billion annual budget, it is appropriate for all taxpayers to pay for safety regulation, wherever the federal government provides such regulation (OSHA, NHTSA, FDA, etc.). As I pointed out in last month's issue, the ATC portion of FAA's current $15.5 billion budget totals about $10.3 billion. Another $3.3 billion supports the Airport Improvement Program. That leaves about $1.9 billion for the FAA's safety regulation and other functions. Under corporatization, the revamped ATO would be supported by its own fees and charges, AIP would be funded by a much-reduced set of aviation excise taxes, and the general fund would pay for the $1.9 billion in regulatory costs (about 12% of the pre-reform FAA budget).

I stand shoulder-to-shoulder with A4A, AOPA, and NBAA in opposing any proposals to increase the tax burden on aviation to pump more money into a failing system. But after this misnamed $100/flight user tax is gone and forgotten, let's get serious about figuring out a set of fees and charges sufficient to fund the corporatized ATO's operating budget and to finance its better-focused ATC modernization program.

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Inspector General and GAO Fault FAA Progress on NextGen

In the 2012 FAA reauthorization bill, Congress imposed a number of requirements on the FAA intended to accelerate implementation of NextGen systems and procedures. Last month the Government Accountability Office (GAO) and the DOT Office of Inspector General (OIG) both provided interim assessments of how the FAA is doing on meeting these requirements. The short answer is: not very well.

Two focal points of the GAO report (GAO-14-285T) were implementation of Performance Based Navigation (PBN) procedures and budgetary trade-offs between patching up aging facilities and equipment and implementing their replacements. On PBN, the legislation required FAA to start using authority it had previously granted FAA to use certified private-sector firms to develop real (as opposed to overlay) RNP approaches to airports. FAA contracted with GE Aviation and Exelis to develop two RNP procedures each at five mid-sized airports, and so far the new procedures have been published for Milwaukee and Syracuse. (Why FAA avoided major urban airports, where the benefits would be larger, remains a mystery.) Congress also gave FAA a categorical exclusion from detailed environmental review for PBN procedures that reduce fuel consumption, CO2 emissions, and noise. FAA has failed to make use of this new authority, which means only one major airport (Seattle) has real RNP procedures in place—and they are authorized only via "waivers" of provisions in the controllers' handbook; the document itself has not been changed.

And on budget planning, GAO said that FAA's "budget planning does not fully account for the impact on the agency's operating costs of the NextGen systems that will be deployed in future years, along with the need for continued operation and maintenance of existing systems and facilities"—what I described several months ago as a potential budgetary death spiral. And GAO ominously noted that "Cost estimates for maintaining existing systems and facilities coupled with implementing NextGen exceed anticipated funding levels" [emphasis added]. This sounds to me like a case where bond financing would certainly help.

I found the OIG report far more troubling, since it addressed larger questions. While both GAO and OIG commended FAA for hiring an Assistant Administrator for NextGen, OIG's report faults the agency for failing to "develop an executable implementation plan that addresses costs and technology development and integration." It also notes that outside experts and senior FAA officials "have cited organizational culture as a major stumbling block to advancing NextGen." And that resistance to large-scale change has, understandably, "contributed to stakeholder skepticism about NextGen's feasibility and reluctance to invest" in equipping their aircraft for NextGen procedures.

What is especially alarming is that after eight years of planning, FAA still has not made key design decisions that will shape many NextGen requirements, timing, and costs. In particular, there is no resolution of (1) the division of responsibility between controllers and pilots in the new system, and (2) the level of automation. As the report notes, "Without a clear vision of such requirements and capabilities, NextGen's benefits, timing, and costs—as well as its integration into the [National Airspace System]—remain uncertain."

There is a lot more detail in the OIG report than I have space to recount here. And let me say that I take no pleasure in writing every year about such reports. There are many dedicated and capable technical and management people at FAA and its Air Traffic Organization, but they are trapped in a dysfunctional model of governance and funding. Fortunately, the aviation community is figuring out that it is the organizational model and funding via the federal budget process that are the problems, not incompetent people. And that offers hope for a meaningful solution.

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Space-Based ADS-B Makes Further Progress

Aireon, the joint venture between Iridium and four ANSPs (Nav Canada, ENAV, IAA, and Naviair), has announced two additional customers for its space-based ADS-B services over the North Atlantic, the world's busiest oceanic airspace. NATS, the UK's ANSP, signed a 12-year service agreement with Aireon in late February. NATS has also signed a commercial agreement to assist in the marketing and deployment of Aireon's space-based ADS-B services in other global regions. A week later Nav Portugal announced a memorandum of understanding to become an early customer of Aireon, laying the basis for a future long-term data services agreement similar to what NATS has signed up for. In addition to its portions of North Atlantic airspace, Nav Portugal also has responsibilities for portions of airspace heading southwestward to South America.

These promising developments raise the question of when the FAA will sign up as a customer. The agency is working cooperatively with Aireon and Nav Canada to develop common requirements for the service—policies, standards, and operational procedures. But it has not yet committed to signing up for data services, unlike six other ANSPs. Why is that?

I addressed this question in my latest column in Air Traffic Management, Issue 1 2014 (www.airtrafficmanagement.com/2014/03/commitment-issues). First, there seems to be a perception within FAA that oceanic airspace is something of a stepchild. Only about 250 controllers (out of about 15,000) work oceanic airspace, and oceanic's capital and operating cost account for a bit over one percent of FAA's budget. International flights in FAA-controlled oceanic airspace are only 8.3% of total flights handled.

But that figure greatly understates the economic value of those flights. A study commissioned by Aireon found that the revenue ton-miles generated by U.S. airlines operating those flights account for 42% of U.S. airline revenue ton-miles. And international air traffic is growing at a much faster rate than domestic traffic. Given the economic importance of international flights to the Air Traffic Organization's major customers, why wouldn't the agency sign up to bring the benefits of radar-like separation in oceanic airspace to these customers?

As we all know, the FAA is under serious budgetary pressures. It has difficulty coming up with an annual budget that can win approval from OMB, and in that kind of environment, signing a long-term service contract looks to OMB like new costs but no new benefits (to the FAA). That's how a government body thinks, but it is clearly not how corporatized ANSPs think about delivering value for their customers.

There is also the question of governmental procurement regulations. Like all other agencies, FAA must seek competitive bids for just about any equipment or service it buys. Signing a sole-source contract with Aireon could cause trouble with any other company that contends it should have been allowed to bid. No such constraint would apply to a corporatized ATO—it would simply make the best decision for its customers, since it would be spending their money, not taxpayers' money.

That's why I expect the ATO to sign up for space-based ADS-B only after it is corporatized.

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Sen. Murray Challenges FAA's "Biographical Test" for New Controllers

In a March 14th hearing of the Senate Transportation Appropriations Subcommittee, Sen. Patty Murray (D, WA) asked probing questions of Transportation Secretary Anthony Foxx about the FAA's new controller recruitment effort (about which I wrote last month). Sen. Murray noted the plight of more than 3,000 graduates of the FAA-sponsored Collegiate Training Initiative (CTI) program who have invested years and many thousands of dollars obtaining degrees in aviation and air traffic control. Under the new approach implemented last month, they no longer have first shot at controller training positions. Instead, they must compete with thousands of off-the-street applicants who are required to have no more than a high-school diploma or three years of any kind of work experience.

Even more troubling to her is the requirement that applicants pass a "biographical questionnaire" (BQ) in order to be considered for an opening in the training program. She noted that of the 28,000 people who applied, only 2,200 passed the BQ. Numerous knowledgeable CTI graduates failed the BQ, but cannot find out why. How can this be, she asked Sec. Foxx. The Secretary gave a pretty general reply, saying the agency had noticed that the group of people who apply for controller training "tend to be rather limited," and that the aim of the new procedure is to try to recruit from a larger population. CTI graduates, he said, will have a leg up during the training—but of course that's only possible if they have passed the BQ.

Sen. Murray was having none of this. She repeated her concern about highly qualified CTI applicants being turned away due to the BQ, and said that controllers union NATCA is also concerned about this. Nobody understands what the BQ is supposed to measure, or why people are failing. Foxx said that he will have FAA Administrator Michael Huerta respond directly to her on these matters. Just to be sure, the Senator repeated that she wants to find out:

Since I wrote last month's story on this major change in controller recruitment, I have learned that some senior people in the Air Traffic Organization had planned on making CTI the primary source of applicants, and were even considering exempting those CTI graduates who passed the traditional aptitude test from some or all of the training at the FAA Academy (which would save the FAA money). This approach was first suggested by the DOT Inspector General in 2005, and was urged on FAA by Congress in the 2012 reauthorization bill. But now FAA has done just the opposite. From everything I can tell, the new recruitment approach was thought up by the FAA Human Resources department, not the ATO, and therefore does not represent ATO thinking on the best way to ensure a highly qualified 21st century NextGen workforce.

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ANSPs and Controller Training

Self-supporting ANSPs generally do their own controller training, but some have branched out, offering this service to others. And in Europe, private-sector controller training schools are competing for the training needs of smaller ANSPs.

Two ANSPs offering controller training worldwide are Airways New Zealand and Nav Canada. Airways has several centers in its home country which offer training to trainees from overseas. And early this year it signed an agreement with Emirates Aviation College in Dubai (part of Emirates Group) to provide controller training in the Middle East. There is a controller shortage in fast-growing parts of the world, including Africa, Asia, the Middle East, and Latin America. In the new venture, Airways will use its SureSelect controller selection program "to guarantee that only the very best students are selected for the program." It will also provide its Total Control simulators. The joint venture aims initially to train 200 ab-initio (no previous aviation experience) trainees per year. The training program is accredited by the International Civil Aviation Organization (ICAO).

Nav Canada trains controllers from abroad, in addition to meeting its own training needs, at its training and conference center in Cornwall, Ontario, called the Nav Centre. The ab initio course consists of two academic years (574 days), beginning with ICAO-standard proficiency in Aviation English, followed by aviation phraseology, and then simulator training. The course finishes up with facility visits. Graduates receive all the ATC coursework on an iPad they can take home. The Nav Centre is currently hosting the first year of instruction for a class of students from Saudi Arabia, under a contract with GACA, the Saudi Arabian ANSP.

Europe's training situation is a bit different, given the evolution toward a Single European Sky (SES). In addition to the in-house training programs of the larger ANSPs, there are at least four commercial providers: Entry Point North, Flight Training Europe, Resource Group, and Global ATS. Under the SES, all EU members are supposed to adhere to Common Core Content in ATC training and to accept controller licensing from another EU member. But according to a study by Aviation Advocacy, some countries "hesitate or refuse to accept another country's license." And interpretation of the Common Core Content varies widely across member states. In addition, according to the study, as the training market gradually opens up, some ANSPs charge obviously below-cost rates for training. The study therefore calls for creating a competitive market for controller training in Europe, with training schools separated from ANSPs and a Europe-wide standard for controller certification by the European Aviation Safety Agency (AESA).

A global market for high-quality controller training is developing, offering advantages for large ANSPs (ancillary revenue) and cost savings for smaller ones. This can only be good for aviation's future.

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News Notes

World ATM Congress Breaks Attendee Record. The second annual ATCA/CANSO World ATM Congress, held earlier this month in Madrid, welcomed 6,265 attendees to the trade show that was part of the event, over 1,000 more than last year. There were 190 exhibitors and attendees from 128 countries. Speakers included FAA Administrator Michael Huerta and Spain's Transport Minister Ana Maria Pastor Julian. Next year's event will be held again in Madrid, March 10-12, 2015.

Honeywell Aiming for Category 2 and 3 GBAS Certification. In addition to announcing that its FAA-certified GBAS landing system has been selected for the new airport now going up on the UK's St. Helena Island, Honeywell has said it plans to seek FAA certification for the more stringent Category 2 and 3 approaches in 2017. The currently available SmartPath GBAS is certified for Category 1 instrument approaches, in which the pilot must see the runway by 200 ft. above the ground. The minimums for more-precise approaches are 100 ft. (Cat. 2) and 50 ft. (Cat. 3).

Sweden Contracts Out More Towers. Swedish ANSP LFV has announced that five more small airport control towers have been contracted out. The winning bidder, Aviation Capacity Resources (ACR), was already the operator of four such towers. Tower services in Sweden were deregulated by the Civil Aviation Act of 2010. The new five-airport contract is expected to save $138 million, approximately 30%.

Mexico Implementing ATFM and ADS-B. SENEAM, the ANSP of Mexico, has announced a contract with Airbus ProSky to implement the country's first Air Traffic Flow Management System. The first phase will be a six month operational demonstration in Mexico City's airspace, with the intent to later expand it nationwide. SENEAM is also installing an ADS-B network from Thales, with initial coverage in the Gulf of Mexico, but with plans for nationwide coverage above 20,000 ft.

U.S. ADS-B Network Nearing Completion. Exelis Corp. expects to finish deployment of the network of ADS-B ground stations in the lower 48 states by the end of March, with "all but a handful" of stations in Alaska, Hawaii, and island territories also installed by then. The total network will consist of 660 ground stations feeding air traffic data to 202 FAA facilities. But it will take FAA until 2019 to finish upgrading the hardware and software at 24 en-route centers, 159 TRACONs and the 44 busiest towers to fuse the ADS-B surveillance data with legacy radar data. If the 2019 deadline is met, that will be within the 2020 deadline for all aircraft in controlled airspace to be equipped with ADS-B/Out capabilities.

FAA Developing TRACON Consolidation Plans. Although it has not complied with a congressional mandate to develop a comprehensive facility consolidation plan and schedule, the FAA announced last month that it is working to create an initial TRACON consolidation plan by the end of this fiscal year. This work will analyze 25 of these facilities to assess whether each should be refurbished or combined with other TRACONs. The average TRACON is 30 years old and the average center is nearly 50 years old.

Inspector General to Review Control Tower Productivity. Last month the DOT Office of Inspector General announced that, at the request of the chairman of the House Transportation & Infrastructure Committee, it will audit the productivity of the FAA's control towers. Previous audits by OIG have found major cost savings for contract towers compared with similar non-radar towers operated directly by the FAA's Air Traffic Organization.

Airport Privatization and ATC Corporatization Tallied in New Report. The Air Transportation chapter in the Reason Foundation's 2014 Annual Privatization Report was released this week. It provides a review of global airport privatization and ATC corporatization developments during the past year. Go to: http://reason.org/news/show/apr-2014-air-transportation.

Transportation Research Board to Educate Airports on NextGen. The Airport Cooperative Research Program (ACRP) is in the process of developing five guides dealing with NextGen's implications for airports. Besides a basic primer, the other four will cover engaging airport stakeholders, airport planning implications, airports' role in PBN, and using NextGen spatial data to benefit airports. More information at www.trb.org/acrp.

Real-Time Air Traffic Online. If you don't already know about it, check out FlightRadar24, a site providing live air traffic movements globally. Its primary data source for real-time data is ADS-B supplemented by data from multilateration, where applicable. FAA radar data are delayed 5 minutes, due to regulation. You can zoom in on any area of the globe. Go to www.flightradar24.com.

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Quotable Quotes

"Poole cites Australia, Canada, Germany, the UK, and New Zealand as examples of countries where ATM provision has been freed from the kind of budgetary and governance constraints that currently handicap the FAA. It seems that those people like Poole who are encouraging a move to a cost recovery or reasonable return model within a liberalized market are winning the argument, at present, to the extent that even the unions have dropped their opposition to discussing change. It would be easy for me to say the NATS model is the one to emulate, but it is one of a number of viable alternatives that would give the FAA the freedom to do the work that everyone knows is needed, while at the same time relieving some of the federal government's budgetary problems. Progress in our industry is notoriously slow at times, but I would not be surprised if Congress began making some tentative steps towards a form of corporatization this year."
—Richard Deakin, CEO of NATS, "Middle Eastern Expansion and the Future of the FAA," Jan. 15, 2014 (http://nats.aero/blog/2014/01/middle-eastern-expansion-future-faa/)

"First come, first served must evolve. Airlines and ANSPs have invested heavily in new equipment that can improve airspace efficiency. But to fully utilize that equipment means moving away from first come, first served because that concept locks in old patterns and limits progress. Imagine an aircraft that cannot make a continuous descent approach because of the legacy systems being used by the aircraft in front. Faced with arguably the greatest period of technological and procedural change, the world's air traffic management system must adapt culturally to take advantage of capabilities that were unheard of just a few short years ago and deliver much-touted financial and environmental benefits."
—Gus Nezer, FAA Air Traffic Organization, "Fair Play," Airspace, Quarter 1 2014

"Viewing it from outside Europe, it's still hard to understand why Eurocontrol has an operational role with the Maastricht Upper Area Control. When you look back, there was clearly a move going back to the time of former director general David MacMillan that was about morphing Eurocontrol's role into one of a quasi-regulator along with some centralized services. When you give Eurocontrol an operational role, it immediately puts itself in competition and they become just another ANSP."
—Neil Planzer, "Solving the Puzzle," Air Traffic Management, Issue 1 2014

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


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