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Reason Foundation

Air Traffic Control Reform Newsletter #38

Topics include: mixed messages on funding Next-Generation system; contract towers' dramatic safety record; lessons from the D.C. airports restructuring; a cost-effective backup for GPS-based navigation; and other news.

Robert Poole
October 1, 2006

In this issue:

Mixed Messages on Funding Next-Generation System

Remember the fable of the blind men and the elephant, in which each felt a different part of the beast and reached the wrong conclusion about what it was? Reading the different accounts of the House Aviation Subcommittee's Sept. 27th hearing on funding the next-generation ATC system brought that fable to mind. Depending on who was reporting on the testimony, the spin varied from "no problem" to "we've got a tough problem to solve."

Needless to say, those opposed to shifting from aviation excise taxes to bondable user fees viewed the testimony through rose-tinted glasses. Rep. Jerry Costello (D, IL) cited projections by the Congressional Budget Office of increasing revenues for the Aviation Trust Fund to dismiss the need for reform of the funding system. But that was an overly hasty dismissal of what looks to be a very real problem.

First of all, the CBO did a top-down projection of aviation excise tax revenues, assuming they grow slightly faster than inflation and expected GDP, based on the historical relationships between air travel and economic growth. That kind of projection ignores the point made repeatedly over the past year by FAA Administrator Marion Blakey that fundamental changes in how passengers are carried�regional jets replacing larger planes, air-taxi and fractional trips replacing airline trips�means that a funding stream based largely on a percentage of passenger fare revenue grows much less than the ATC system's workload. The same number of passengers in 2015 that would have been carried on N planes in the mix of aircraft we used to have will likely be carried on 2N planes instead. Hence, one of the basic findings of the report by Clint Oster and John Strong (last issue) is that there is a "disconnect between cost drivers and revenue drivers" in air traffic control. (Their report, "Reforming the Federal Aviation Administration: Lessons from Canada and the United Kingdom," is available at www.businessofgovernment.org.)

That fundamental point was addressed in testimony by the Government Accountability Office's Gerald Dillingham (GAO-06-1114T). Table 1 in his testimony illustrates that the substitution of three RJ flights for a single 737 on a 300-mile trip generates the same total user-tax revenues for FAA—but with three times the ATC workload in the RJ case. The testimony goes on to discuss the equity issues involved in the current tax-based approach. For that same 300-mile flight, a 767 would pay $1,742, a 737 just $877, and Learjet 35 only $41—yet each would receive the same ATC services.

A second key point was made by MIT's John Hansman. Under the baseline forecast of the FAA's Research & Development Advisory Committee (REDAC), the FAA will be about $1 billion per year short (over the next 20 years) of the funding needed to develop and implement the Next Generation system. And that base case assumes�contrary to all previous experience with FAA modernization efforts�that significant productivity increases begin in 2011, such that ATC operating costs would thereafter remain at 2011 levels in constant dollars. From where I sit, that is a heroic assumption, in the absence of fundamental governance reform of the kind that has occurred in the Australian, Canadian, German, and U.K air traffic control systems. Thus, the actual shortfall could be considerably greater than $1 billion per year.

Third, as Chairman Mica pointed out, even if there were sufficient surpluses in the Aviation Trust Fund to cover the billion per year new-investment need, under current federal budget rules it would be very difficult to spend the money! That's because "the revenues from aviation system users come in on the mandatory side of the budget, but must be spent on the discretionary side of the budget, where they are subject to discretionary spending limits." Hence, that spending must compete with all the other discretionary spending in the federal budget.

Bottom line: there is a significant funding gap, and attempting to implement the Next Generation system without fixing it is a recipe for disaster.


Contract Towers' Dramatic Safety Record

It's ironic that during the past six years of the Bush Administration, there have been only a few dozen additions to the highly successful FAA Contract Tower program (compared with 116 added during the eight years of the Clinton Administration). Towers in the program are generally at smaller airports handling mostly general aviation planes (though a few of these airports also handle scheduled airline service). The "control group" against which the contract towers are generally compared by the DOT Inspector General's Office and the Government Accountability Office are the 71 remaining FAA VFR towers.

I recently received a report from the Contract Tower Association, presenting data for 2003 and 2004 on the safety records of contract towers and FAA VFR towers. The data source is the FAA's National Airspace Information Monitoring System. The basic reporting unit is the number of operational errors and deviations (OEDs) during a given time period. This is a basic measure of the quality of controller performance, and it's defined consistently for all towers. The data are summarized in the table below.

Calendar Year 2003

ContractTowers

FAA Towers

OEDs

9

33

Operations

15.8 million

12.8 million

Rate

1 per 1.75 million

1 per 388,000

Calendar Year 2004

OEDs

17

26

Operations

15.9 million

12.1 million

Rate

1 per 935,000

1 per 465,000

Two-Year Average

OEDs

13

29.5

Operations

15.85 million

12.45 million

Rate

1 per 1.22 million

1 per 422,000

Those are pretty striking differences. Over the two-year period, the comparable towers operated by FAA controllers had three times the rate of operational errors and deviations.

This raises two questions. The first is: How come? Former FAA manager Ed Drury, whose article critical of FAA's Train to Succeed program I reviewed last issue, points out that contract tower companies "fire controller trainees who can't certify in 30 days, while the FAA shuffles their non-performers to the VFR towers."

The second question is: Why aren't we converting the remaining FAA VFR towers to contract towers? This action has been recommended by the Inspector General and by the FAA's Management Advisory Council, among others. The IG's most recent report on the subject found that the contract towers cost less than half as much to operate. If you can get superior performance for a fraction of the cost, why not do it?


Lessons from the Washington, DC Airports Restructuring

Those of us who were doing transportation policy work in the 1980s recall the dismal straits the DC airports were in, in those days. What was then called National Airport was the pits, with an overcrowded, threadbare terminal that cried out for expansion or replacement. And Dulles was still a white elephant, not yet surrounded by high-tech industries and housing, but also with insufficient terminal space to land a critical mass of airline service (like the eventual United hub).

The DC airports were starved of capital and unable to modernize because they were owned and operated by the FAA. That meant their budgets were line items in the FAA budget, subject to all the constraints and micromanagement of the federal budget process. As retired airports director Jim Wilding recalls, the airports' "revenues went into the general receipts of the US Treasury where they disappeared into the growing abyss of the federal budget deficit. The airport operations had no claim on them. All of the operating and development funds for the airports were derived from the federal appropriations process... We were running a fair size enterprise that had no real linkage between its revenues and expenses." Just like today's air traffic control system—and for the same reason.

Wilding and his team decided that the answer was to create a federal corporation to own and manage the airports, but the idea went nowhere until Elizabeth Dole became Secretary of Transportation in 1983. Dole "questioned why the airports were even in her Department," and created a commission to figure out how to get them out. Note that she did not ask them whether the airports should be divested. She asked them to come up with a way to get it done. The commission, chaired by former Virginia governor Linwood Holton, produced the idea for a Metropolitan Washington Airports Authority as the new owner/operator.

In his August 2006 memoir, "A History of the Metropolitan Washington Airports Authority and of Its Two Airports, National and Dulles," Wilding recounts the battle to get Congress's agreement to give up control over the airports. It took two years, including overcoming a weeklong filibuster by Sens. Hollings and Sarbanes. The legislative effort died at several points, Wilding writes, "but Sec. Dole revived it on each occasion. She was relentless. She threw the weight of her office fully behind it and personally lobbied for it at every turn, as did Gov. Holton." Crucial to finally winning were several compromises�making the transfer a long-term lease rather than outright change of ownership, providing stronger employee-protection provisions, and adding a congressional "Board of Review" (later ruled unconstitutional). Implementing the legislation was also a challenge, as "there were many in key positions that did not relish 'losing' the airports and who were not going to lift a finger to help us move through the transition." Wilding cites the key role played by Deputy Secretary Jim Burnley in giving MWAA sweeping administrative authority to get past those problems.

The resulting MWAA has been a huge success. As a self-supporting enterprise, it was able to gain control of its revenues and go to the bond markets to fund major expansion and modernization efforts. The results are today's wonderful terminal at Reagan National and the huge ongoing expansions at Dulles.

There are lessons here for major ATC reform. It will take an all-out effort, backed by a broad swathe of the aviation community, aggressively pushed by the DOT Secretary and FAA Administrator with the full support of the White House. Divesting the DC Two looked impossible at the time—yet it was done. The same can be done for air traffic control.


Cost-Effective Backup for GPS-Based Navigation

One of the key premises of the planned Next Generation system is that it will rely primarily on satellite-based navigation (GPS, Galileo, etc.), allowing the shutdown of much of the costly-to-maintain ground-based navigation aids such as VORs, DME, and and Instrument Landing Systems (ILSs). In the 2004 FAA budget, just operating and maintaining those three systems totaled $190 million, and the ATO's Russ Chew has estimated that replacing them with more modern versions would cost over $1 billion.

Yet it has long been recognized that a system based solely on GPS would be vulnerable to interference�both unintended and intentional. So there is a need for some kind of back-up system, to ensure that not merely planes but everything else that now depends on GPS signals can keep operating despite such interference. But there is no consensus on what that backup should be. The FAA has talked about retaining a significant fraction of the VOR network, along with many ILSs, and even expanding DME, but doing that would mean foregoing a lot of potential cost savings from the Next Generation system.

Against this backdrop, I was very pleased to receive last month a new report on GPS backup. It was developed for the ATO by Dr. Robert Lilley, Gary Church, and Michael Harrison of Aviation Management Associates. The authors point out that GPS's "target value" to enemies increases as ground-based navaids are removed, and as the nation embraces GPS for more and more uses. The more ubiquitous GPS becomes, the more attractive the target. After assessing the backup alternatives, they suggest that the most cost-effective approach is none of the above alternatives. Rather than retaining and modernizing VOR, DME, or ILS, they recommend upgrading the existing Loran-C network to something called enhanced Loran or eLoran. Loran was developed by the Coast Guard originally for maritime navigation. It was being used for some domestic air navigation purposes by the mid-1980s, when it began to be eclipsed by GPS. Today, although it is considered one backup for GPS, its long-term future is in doubt, due to Coast Guard budgetary concerns.

The new eLoran would add new capabilities to the 24 US Loran ground stations, enabling them to function as the equivalent of fixed-location GPS stations. eLoran has now demonstrated the capability to meet all the FAA's performance requirements as a GPS backup, including navigation performance accuracy to within 0.3 nautical miles (defined as RNP-0.3). What is lacking, the paper points out, is policy decisions on which GPS backup approach to choose. Avionics manufacturers will not produce the needed on-board GPS/WAAS/eLoran receivers, nor will Boeing and Airbus equip new planes with them, nor will existing aircraft owners purchase add-on boxes—unless there is a clear decision that eLoran will be the backup approach, rather than one of the other (VOR/DME/ILS) avenues.

This is a detailed technical report, but if you are up for this kind of thing, I highly recommend it. Go to www.avmgt.com and click on AMA Publications.


GA's "United" Front Against User Fees

Last month I took part in a panel on ATC reform at the annual convention of the Airports Council International-North America, in Reno. On the panel with me were Jim May, head of the Air Transport Association, and Ed Bolen, head of the National Business Aviation Association. We unfortunately did not have much time for back-and-forth discussion, but if you would like a copy of my Powerpoint presentation, I'd be glad to email it to you.

On my way out, someone handed me a two-page flyer topped with the logos of AOPA, EAA, GAMA, and NBAA (notice a striking omission?) and headlined, "General Aviation United Against User Fees." Actually, the flyer is mostly an attack on the specific "SmartSkies" proposal from ATA, so it devotes about half its space just to that plan. The flyer makes a number of allegations that are poorly supported. Had we had time in Reno, I would have responded to these points, which were also in Ed Bolen's presentation. As a second-best approach, I will respond via this newsletter.

Claim: Airlines "falsely claim that they pay more than 90 percent of all aviation taxes, while their operations make up only two-thirds of activity in the system."

Fact: The FAA's FY2004 ETMS data package, on p. 17 breaks down how much of each aviation tax comes from each source. Passenger airlines alone contributed 90.1%, with cargo adding another 5.4%. Page 5 of the same data package shows that of 2004 flights within the en-route ATC system, passenger airlines represented 61.3% and cargo carriers another 6.9%.

Claim: Airlines want to "essentially take over control of ATC by establishing a board that would be dominated by the airlines."

Fact: To the best of my knowledge, the airlines have not made anything more than a very general proposal for a board of directors to run the ATC system. In the Fall 2006 issue of the ACI-NA magazine Centerlines, Jim May is quoted as follows: "We are proposing a quasi-government, independent board of directors to run the ATC system that has representation from all sectors of the aviation community and government." In point of fact, no such board could come into existence without legislation, and Congress would ensure that non-airline stakeholders are fairly represented.

Claim: "A user fee scheme would require the creation of an inefficient government bureaucracy to bill and collect these fees."

Fact: No such costly bureaucracy is needed by Eurocontrol, Nav Canada, or Airservices Australia, all of which collect user fees daily from flights within their airspace. Their cost of collection is a fraction of one percent of the amount billed. Even the FAA seems to be collecting its new overflight fees simply and efficiently. Any workable fee system should be based on parameters automatically extractable from filed flight plans; it's a simple software operation.

Claim: We should not "scrap the stable and reliable funding system that exists today..."

Fact: Today's funding system is hardly stable and reliable. Twice in the past 25 years, the revenue from aviation excise taxes dropped to zero for long portions of the year, when Congress failed to extend the taxes. Over that same period, general fund support for FAA has fluctuated from as little as zero to as much as 48% (it's currently around 20%). And the vital capital spending�the budget account known as Facilities & Equipment�in just the past decade has bounced around from a high of $3.46 billion (in 1992) to a low of $2.43 billion (in 1998)�both in 2006 dollars.

Underlying these groups' defense of the status quo is a kind of have-your-cake-and-eat-it-too mentality. When it comes to using the ATC system, the NBAA proudly tells potential bizjet purchasers that it's a major player, with its own representative alongside the airlines' rep in the FAA national flow control center in Herndon, VA. And with corporate, fractional, and air-taxi jets making up more than 15% of the traffic in the system, they are among the system's core users. Yet when it comes to paying for that use, they claim to be marginal users, in a system that would be just as large, complex, and costly if they didn't exist. That might have been true 25 years ago, before the large expansion of business jet operations in recent years, but it's not true today and it certainly won't be true in the future envisioned by the JPDO as it plans the Next Generation system.

One of the core concepts that led the aviation community in Canada (including business aviation) to support the creation of Nav Canada and the shift from aviation taxes to direct user fees was "user pay means user say." The converse is equally true: user say means user pay. Core users of ATC who want a full share in its governance need to be prepared to pay their way. Marginal users, on the other hand, may end up with marginal say. In Canada, the Canadian Business Aviation Association decided to play, and won representation on the Nav Canada board. The Canadian Owners & Pilots Association decided they were marginal users and stayed out. You pays your money and takes your choice.


News Notes

Canada Transportation Person of the Year. Each year, the Transportation Association of Canada selects a transportation leader as its Transportation Person of the Year. The 2006 winner, announced last month, is Nav Canada President and CEO John Crichton. Nav Canada board chairman Nick Geer pointed out that "John helped forge the unique consensus among airlines, business aviation, employees, and the federal government that was necessary for the transfer of the Air Navigation System to Nav Canada 10 short years ago this fall."

Swedish, Danish ANSPs Honored by Airlines. The International Air Transport Association has given its 2006 Eagle Award to the commercialized air navigation service provider of Sweden, LFV. The award noted that LFV has reduced its unit rate by an average of 6.6% per year over the past four years. Runner-up for the award was another commercialized ANSP, Denmark's NAVIAIR.

NATS to Design Dubai Airspace. NATS, the part-privatized ANSP in the UK, has received a contract from the government of the United Arab Emirates to design the airspace around Jebel Ali International Airport in Dubai. NATS is also upgrading the airport ATC system for the Taranto Airport in southern Italy, a key shipment point for large components for Boeing aircraft.


Quotable Quote

"The limits of our overstretched air traffic control (ATC) system have become painfully apparent over the past few years... Despite recent spending increases for aviation needs, the funding of the ATC system remains dependent on the federal government, which can take away in one year what it gave in a prior one. An efficient ATC system needs to be able to rely on a long-term, stable funding stream, not on one that can vary with the whims of Congress."

—Sen. John McCain, quoted in Managing the Skies, Sept./Oct. 2006.

"If you are going to migrate to a system that requires the users to pay more for a particular set of benefits, the users better be involved in defining what those benefits to the system can be. For airports, obviously, it's the terminal environment and technologies that do things like increase capacity during inclement weather, particularly with closely spaced parallel runways. We need some confidence that when the FAA chooses its priorities for air traffic modernization, that our priorities are going to be a part of that process."

—Steve Van Beek, Airports Council International-North America, in Airport Business Online, August 1, 2006.


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


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