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Reason Foundation

Air Traffic Control Reform Newsletter #2

Topics include: NavCanada copes with September 11th shut-down; ATC providers adjust to air travel slowdown; ATC corporatizations in Denmark, Hungary, and Singapore; and other breaking news.

Robert Poole
November 1, 2001

In this issue:

NavCanada Copes with September 11 Shut-Down

The world's second-largest ATC system coped admirably with the terror attacks of September 11th. At 10:45 AM that morning, Nav Canada called a halt to all departure activity from Canadian airports, and at 12:30 the Minister of Transport ordered the closure of Canadian airspace (via a Notice to Airmen). The Canadian military, coordinating with NORAD, implemented Emergency Security Control of Air Traffic (ESCAT Level II). This allowed only military, search & rescue, police, medevac, and humanitarian flights to operate.

About 400 aircraft were over the North Atlantic at the time of the shut-down. Those that had not reached the halfway point were sent back to their originating airport, while the others were diverted to the nearest airport ahead. In most cases, aircraft destined for the United States were diverted to Canada. Altogether, Nav Canada handled 239 such diversions, coordinating with Transport Canada, airlines, airport authorities, and local emergency-services organizations. And as operating restrictions began to be removed in subsequent days, Nav Canada coordinated the relocation of diverted aircraft and the transition back to regular air service.

Given Canada's location, and its control of half of the world's busiest oceanic airspace, the North Atlantic, the events of Sept. 11 and its aftermath were a severe test of the ability of a corporatized ATC provider to cope with a national-security emergency. By all accounts, Nav Canada passed this test with flying colors.

Note: Air traffic control responsibility was shifted from Transport Canada to Nav Canada five years ago this month. Nav Canada is a not-for-profit corporation governed by a stakeholder board. It is self-funding from the fees charged to users of ATC services.


ATC Providers Adjust to Air Travel Slowdowns

As of this month, there are 25 full members of CANSO, the membership organization for corporatized ATC providers. In recent weeks, reports have begun coming in about how they are adjusting to the unexpected fall-off in air travel, due to the combined effects of Sept. 11th and slowing economies. Here are some highlights.

Airways Corporation of New Zealand — Airways seems to be little affected. It is forecasting reduced profits during 2002, but had a very good fiscal 2001, enabling it to provide a NZ$2.4 million rebate to its customers.

Deutsche FlugSicherung (DFS) — Germany's ATC corporation had its first operating loss in fiscal 2001, causing it to announce rate increases for 2002. German airlines have begun calling for DFS to be privatized along the lines of the UK's NATS, which is now partially owned by UK airlines.

NATS — The world's first privatized ATC provider (46 percent owned by UK airlines, as of summer 2001) is heavily dependent on North Atlantic traffic, which has been hit hard. It has announced a 20 percent cut in management and support staff over the coming year, and is postponing the construction of the long-planned ATC center in Scotland for 18 to 24 months in order to conserve capital. It is also considering moving corporate headquarters to a less-expensive place than central London.

Nav Canada — The company is projecting a 15 percent revenue shortfall for fiscal 2002, due to reduced air traffic, equal to C$145 million. To cope, it plans C$85 million in cost cuts, will draw down C$30 million from its rate stabilization fund (a rainy-day fund, fed by retained earnings), and will rescind the temporary rate reduction that has been in effect since September 1999 (another C$30 million). Moody's has just reaffirmed the company's A2 (investment grade) credit rating.

In short, these ATC corporations have the flexibility to reduce costs and adjust their fees and charges in response to unexpected changes in the aviation environment.


More ATC Corporatizations Taking Place

The September and October CANSO newsletters bring news of ATC corporation developments in three more countries (www.canso.org).

Denmark — Following a May 2000 decision to separate air safety regulation from the provision of ATC services, the final separation took place on September 1, 2001. From that date onward, NAVIAIR became a self-supporting corporate entity. Area control services are paid for via en-route charges, collected by Eurocontrol. (About 60 percent of these flights are overflights, which are routinely charged for in Europe and Canada, though not yet in the United States.) Approach and tower services are paid for via charges paid to the relevant airport, under contractual agreement with NAVIAIR.

Hungary — On July 1, 2001, the former airport and ATC administration was split into two separate companies, Budapest Airport and HungaroControl. The latter will become a full-fledged, self-supporting ATC company.

Singapore — Local media report that investment banking firms have been asked to submit proposals to handle the corporatization of the Civil Aviation Authority of Singapore, which is currently responsible for ATC, airport operation, and air-safety regulation. The government officially says that it has considered corporatizing CAAC and "remains open to the possibility."


Notable News Articles

Business & Commercial Aviation's October 2001 issue carries a detailed and quite positive article about Nav Canada, titled "Users Praise Nav Canada, But Controllers Feel Neglected." Especially noteworthy in this GA-oriented magazine is the news that all three major aviation organizations in Canada, including the Canadian Owners and Pilots Association, had nothing negative to say about Nav Canada.

And the October 22, 2001 issue of Aviation Week carries a pair of very positive articles about the changes resulting from the corporatization of Australia's ATC system. "Technology Is Key to Australia's ATC" provides the overview, noting that fees have steadily decreased, flight information regions have been consolidated (with significant personnel savings), and much new technology implemented. More details on Airservices Australia's two new control centers will be found in the companion article, "Centers Control 11% of Earth's Airspace." Author William B. Scott pointedly notes that his investigation of the changes "highlighted the value of establishing a self-funded commercial-type organization." The articles can be found here.


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


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