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Reason Foundation

Airport Policy and Security Newsletter #70

Reforming airport screening, runway pricing for New York airports, TSA budget cuts, St. Louis air cargo boondoggle

Robert Poole
July 18, 2011

In this issue:

Mica Report Calls for Major Screening Changes

Until recently, the differences in cost between TSA-certified private screening companies and TSA’s own screeners were difficult to pin down. The report by Catapult Consultants in 2007, commissioned and then suppressed by the TSA, compared screening costs at six airports with private screeners and six comparable airports with TSA screening. Using only TSA-supplied cost data, it found that private screening cost 17% more, but delivered performance equal to or better than TSA. TSA’s subsequent in-house study, using a different methodology, also claimed that private screening was 17% more costly. But both studies were criticized by the Government Accountability Office for flawed methodology and for ignoring various overhead costs. In response to that critique, TSA’s recent revision reduced the difference to 3%. But a new analysis by the staff of the House Transportation & Infrastructure Committee provides a decidedly different cost comparison—and also documents union and TSA efforts to kill the private screening program.

Released on June 3rd, the committee’s report,“TSA Ignores More Cost-Effective Screening Model,” is well worth a detailed look. (http://transportation.house.gov/News/PRArticle.aspx?NewsID=1291.) The headline item is a detailed comparison of screening costs at two major airports: LAX and SFO. Using data on the number of screeners at each airport and the annual passengers screened, the report finds that the private company at SFO process 65% more passengers per screener than do TSA screeners at LAX. If screeners at LAX operated as efficiently, the LAX screener workforce could be 867 persons smaller, at an annual saving of more than $33 million. The analysis also finds that annual screener attrition at LAX is 13.8%, versus just 8.7% at SFO. Factoring in the much higher recruitment and training cost for TSA screeners at LAX, the report estimates that such costs exceed $5.3 million at LAX versus $507,000 at SFO. Yet another cost comes about because, to fill in open screener positions at LAX (due to attrition), TSA has to fly in its National Deployment Force of roving screeners, at a cost of $637,000 per year; no such cost exists at SFO. Putting all of this together, the report estimates that if the private screener model were applied to LAX, the total cost of the screener workforce there would decrease from $90.6 million/year to $52 million/year—a 42% reduction.

To be sure, that is not a large statistical study; it’s a comparison of just two major airports. Still, the same underlying factors—lower screening productivity, higher attrition rate, and the need to make use of TSA’s costly NDF—probably apply to many other large and medium-size airports. So the report’s estimate that applying the private-screening model at the nation’s busiest 35 airports could save more than $200 million per year is plausible—indeed, it sounds overly conservative to me.

What I found even more newsworthy is the report’s documentation of a concerted effort by screener unions and factions within TSA to eliminate the Screening Partnership Program (SPP) under which airports are allowed to opt out of TSA-provided screening. It traces how officials of the American Federation of Government Employees (AFGE) lobbied TSA headquarters last fall and winter, and believed they had won an agreement to abolish the program. Those efforts preceded TSA Administrator John Pistole’s announcement in January that he was rejecting five long-pending applications to join the program and that no more airports would be allowed to join it, because he saw no “clear or substantial advantage” in expanding the program.

The report then provides chapter and verse on the travails of the five airports, seeking to establish that each would have a “clear and substantial advantage” if it could shift from TSA screening to the SPP model. That’s true, but is beside the point. The underlying statute—the Aviation & Transportation Security Act of 2001—does not put the burden of proof on the airport to demonstrate a “clear and substantial advantage” in order to outsource. It says that all airports are allowed to do so, period. And while I agree with the report’s recommendation that “The TSA Administrator should not have the discretion to deny an airport authority’s SPP application,” I reject the report’s assumption that the TSA should select the appropriate screening company. Instead, once TSA certifies companies as qualified to provide screening services at a given category of airport, an airport in that category should be free to select, by competitive bidding, any such company that TSA has certified.

And I fully agree with the report’s number one recommendation: “TSA should not serve as regulator, operator, and auditor of screening operations at airports,” which is a clear conflict of interest. Instead, the United States should follow the emerging global model in which screening is devolved to the airport level, under federal (TSA) supervision. In other words, all airports would use something like the SPP model, which permits the airport to either provide its own screening staff (meeting TSA standards) or contract with a TSA-approved screening company. The report’s Appendix 1 provides a detailed table showing how widespread this model is, especially in Europe.

Time to Revisit Runway Pricing for New York Airports

A one-paragraph item in Aviation Daily recently said that the U.S. DOT “is planning to publish a Notice of Proposed Rulemaking this summer to create a long-term congestion management plan” for the three major New York airports: Kennedy (JFK), LaGuardia (LGA), and Newark (EWR). This presents a great opportunity to consider runway congestion pricing as a powerful solution.

Several key developments have occurred since the DOT’s abortive efforts to develop a pricing approach for these, the country’s most-congested airports, in 2007-2008. First, although it failed to get any kind of pricing implemented at the New York airports, DOT did manage to revise its airports rates and charges policy. It now permits runway pricing that can include both a traditional weight-based component and a demand-based component. Second, in 2009 the Airport Cooperative Research Program’s Report 31, “Innovative Approaches to Addressing Aviation Capacity Issues in Coastal Mega-Regions,” concluded that “The most fundamental change suggested by the research is for all the major parties to recognize demand management” as a legitimate approach in dealing with the problem. Third, the New York business community has rallied in support of adding capacity to the region’s major airports, as discussed in the Regional Plan Association’s path-breaking 2011 report, “Upgrading to World Class: The Future of the New York Region’s Airports.”

The last of these is especially important in that it ended several decades during which airport capacity additions were off-limits to serious discussion in the New York area. Unfortunately, the RPA report, while coming up with realistic proposals for adding runways at JFK and EWR (in part by taking advantage of NextGen improvements), fails to provide a serious discussion of how to pay for the billions of dollars in capital costs this will require. And its chapter on demand management views both the administrative (rationing) and market-based (pricing or auctions) alternatives essentially as an alternative to expansion—rationing either by fiat or by price. But serious runway pricing can be both an allocation tool and a funding tool, just as revamped pricing can be used on a toll road both to manage traffic flow (congestion pricing) and to finance reconstruction and expansion (as a revenue stream for long-term revenue bonds).

The RPA demand-management chapter pretty much dismisses runway pricing, by asserting that federal policy requires revenue neutrality, such that “the total amount that an airport operator can charge the air carriers collectively cannot exceed the reasonable cost to operate the airfield.” I read the revised DOT rates and charges policy (which has withstood a legal challenge) is applying to the capital and operating costs of the airport, and if the current policy is ambiguous on that score, the DOT can clarify that as part of developing the new congestion management plan. In addition, if one of the airports (e.g., EWR) ends up producing surplus revenues under runway pricing, DOT could also provide for such surpluses to be reinvested in other airports in the region for capacity expansion purposes.

Let me also suggest that those involved in developing the congestion management plan revisit the 2007 Reason Foundation report I co-authored with Ben Dachis, “Congestion Pricing for the New York Airports.” (http://reason.org/news/show/congestion-pricing-for-the-new). Done at the request of the DOT Office of the Secretary, it attempts to answer all the objections to pricing that were being raised by airlines at the time, as well as making a case for the superiority of runway pricing over auctions. These include the following:

Modest Trims to TSA Budget Don’t Go Far Enough

“House Votes to Slash TSA’s Budget by $270 Million,” read the headline on the June 3rd Washington Post “Federal Worker” column. The occasion for the column was the House passage of a $40.6 billion Homeland Security appropriations bill the day before. Even with this “slash,” the TSA budget amount of $5.2 billion was only 3.7% less than the Administration’s budget request.

What triggered the columnist’s ire was an amendment offered from the floor by Transportation & Infrastructure Committee chairman John Mica (R, FL), capping the budget for TSA airport screeners at $2.76 billion, a cut of 10%. This change did not affect the total of $5.2 billion already agreed to for TSA; it merely limits that particular account. It would appear to require TSA to lay off “nearly all of the new screeners hired over the past 12 months” to operate the new body-scanning machines, according to an assessment in the June 8th edition of Transportation Weekly. That same analysis points out that the $270 million is still in the TSA budget, and can be used either for privatized screening  or for the budget category called “screener training and other.” So to charge that this “mass layoff” of screeners “would decrease safety,” as claimed by Rep. David Price (D, NC) strikes me as sophistry.

But unfortunately, when it comes to body scanners (and the associated intrusive pat-downs), the House did not go far enough. Yes, it denied the Administration’s request for 250 additional body-scanners, but it continued funding for the 1,000 still on order. That means TSA is free to continue its planned roll-out of body scanners as primary screening at all major airports, rather than repurposing the 500 body scanners already installed at 78 airports for secondary screening (for higher-risk travelers) only. The House also denied the Administration’s request for 350 additional Behavior Detection Officers, a program whose effectiveness the TSA has still not been able to justify but wants to expand anyway.

At best this bill is a warning shot across the TSA’s bow. It does not reflect the kind of top-to-bottom rethink of TSA that many of us have been calling for in this 10th anniversary year of the agency’s creation.

Derailing an Air Cargo Boondoggle

Last month an article appeared in the online edition of Air Cargo News. “St. Louis Air Cargo—An Aerotropolis Too Far?” by Michael Webber, quickly went viral and received 108,000 hits in 24 hours. (www.aircargonews.com/0611/FT110614.html)

The article took issue with a plan to develop declining St. Louis Lambert International Airport into the nation’s Midwest China Hub. Supported by local area boosters, the “Midwest-China Hub Committee” put forth the idea that this airport can and should become the principal air cargo hub, at least in the Midwest, for trade with China. Webber is a long-time air-cargo consultant (many years with Leigh Fisher Associates prior to launching his own Webber Air Cargo, Inc. in 2001). His article provides a reality check on the likelihood of this plan’s success—which appears close to zero.

Lambert’s air cargo volume has declined 20% between 2000 and 2010. It’s only a few hundred miles from the major Midwest cargo hub—Chicago O’Hare, which is midway through a large expansion. While served by both UPS and Fedex, which account for about 90% of its cargo today, Lambert is a hub for neither, but both major carriers already have Midwestern hubs—Louisville, Memphis, Rockford, and Indianapolis. Much cargo is also carried in the bellies of passenger planes, especially wide-bodies. While Lambert’s passenger enplanements have plunged since the demise of TWA, O’Hare has continued to grow, as a domestic and international hub for both American and United and with numerous international passenger routes served by major foreign airlines, as well as all-cargo carriers such as Nippon Cargo and Cargolux.

The Midwest-China Hub concept has received no independent analysis, but was poised to receive $400 million in general tax money from the Missouri Legislature; this was averted when the session ended before the proponents’ bill could be enacted. Instead of analysis, all that was available was PR boosterism, supported by the St. Louis business establishment, with some help from over $1 million in federal and state grants. Some of that largesse was secured by former Sen. Kit Bond (R, MO), whose former chief of staff serves as executive director of the Midwest-China Hub Commission. Incidentally, none of these plans have been put through the normal FAA airport master plan process; it’s all been done politically.

Webber tells me that he offered his article originally to both the Kansas City Star and the Kansas City Business Journal, both of which turned it down. Thanks to Air Cargo News, the lid has been lifted on this boondoggle in the making.

Bogus Documents—a Growing Problem in Airport Security

A few weeks before Olajide Noibi was caught after successfully boarding a Virgin America flight with an expired boarding pass, I came across a presentation by Interpol’s Secretary General Ronald Noble at the IATA annual general meeting in Singapore. He pointed out that more than half of all international travelers’ passports were not checked against Interpol’s database last year. Of those that were checked, about 40,000 (about 1%) had been listed as lost or stolen. On a related subject, he showed the audience a phony Lufthansa employee badge, explaining that it had been produced by a street vendor in Bangkok in about an hour. And you may recall an article in the November 2008 issue of The Atlantic (“The Things He Carried”) in which writer Jeffrey Goldberg used a fake boarding pass created by security consultant Bruce Schneier to successfully get through the screening checkpoint at Minneapolis/St. Paul.

The common element here is documents that aren’t what they are purported to be—but which are relatively easy even for non-terrorists to obtain. Goldberg’s article explains how Noibi could have gotten through the checkpoint—the document checker only compares the information on the boarding pass with the information on the photo ID. There is no check against aviation security watch-lists (which only takes place at the time of ticket purchase). So someone with either a phony ID or a faked boarding pass can get through, as long as the two match. That loophole has not been corrected, two and a half years after Schneier and Goldberg exposed it.

But that is apparently not how Noibi got through the checkpoint or onto the flight. We don’t know what documents he produced at the checkpoint, but at the gate he showed an expired boarding pass for a different flight with someone else’s name on it, and when asked for ID, he produced an expired university ID card in his own name. And he got through a checkpoint at LAX several days later (again, we don’t know how), but this time Delta refused to let him board with an expired boarding pass issued in someone else’s name.

We only know of these two attempts, but Noibi was found to be in possession of at least 10 other boarding passes, all in other people’s names, which suggests that he may have been in the habit of getting free flights this way. If so, every such flight implies a passage through TSA security screening undetected.

I join House Homeland Security chairman Peter King (R, NY) in being seriously concerned about these breakdowns in checkpoint security. The TSA should be required to explain publicly how these repeated failures occurred.

News Notes

Reason Seeks Communications Specialist
The Reason Foundation is seeking to add a full-time person to its communications team. The person must have excellent writing and editing skills and at least several years of relevant experience. A complete job description is posted at: http://reason.org/about/jobs. Applications, including a cover letter and writing samples, must be submitted by July 29th to: amy.pelletier@reason.org.

San Juan Airport Heads toward Privatization

Puerto Rico’s Public-Private Partnership Authority announced on June 27th that it had  secured all the required airline approvals to go forward with a long-term lease of Luis Munoz Marin International Airport under the federal Airport Privatization Pilot Program. On July 5th it released a Request for Qualifications, to which potential bidders must respond by August 8th. Advising the government on the privatization are Credit Suisse Securities (finance and procurement), Leigh Fisher (technical), Mayer Brown (US legal counsel), and Pietroantoni Mendez & Alvarez (local legal counsel). Governor Luis Fortuno told business leaders at a conference in June that he expects the new operator to be in place by the first quarter of 2012.

Senate Bills Could Help—or Hurt—Airport Privatization

Last month Illinois’ two U.S. senators introduced competing bills dealing with infrastructure privatization. Sen. Dick Durbin (D, IL) introduced a measure that would require repayment of any previous federal grant monies the airport (or other infrastructure) had received, in the event of it being privatized. By contrast, the measure by Sen. Mark Kirk (R, IL) aims at encouraging such privatization. It would remove the limit on the number of airports that can be privatized and ease other restrictions. In surface transportation, it would increase six-fold the annual budget for TIFIA (the Transportation Infrastructure Finance & Innovation Act), which provides gap funding for new infrastructure with dedicated revenue sources.

Frankfurt Gets Expanded Multilateration System

Fraport has selected Sensis Corporation to expand and upgrade the surveillance and tracking system for aircraft and ground vehicles on Frankfurt airport’s surface. Frankfurt has had a Sensis multilateration system in place since 1999, but with the opening of a fourth runway this fall and a new pier at Terminal 1 next summer, the system needed to be expanded. Under the contract announced June 13th, Sensis will replace all the existing multilateration sensors with the newest version, in addition to adding sensors to cover the new runway and terminal areas.

European Airport Privatization News

Last month Hungary sold a 25% stake in Budapest airport to Hochtief, which already owned 37.3%. The new stake was valued at $192 million. In Italy, the operator of Milan’s two airports, SEA SpA, announced that it will go ahead with its planned initial public offering (IPO) of shares before the end of the year. There had been speculation that the IPO would be postponed until next year. And the Spanish government has selected Royal Bank of Scotland Group to handle its planned airport privatization. The plan is to offer 49% of AENA Aeropuertos (the government’s airports holding company) in addition to leasing the Madrid and Barcelona airports for 15 years.

Low-Cost Carriers Gaining Majority in Europe

A study by UK-based York Aviation has found that in the 20 years of their existence, low-cost carriers (LCCs) in Europe have grown their overall market share from zero to 38%; it projects this to grow to 58% by 2020, while their point-to-point share will climb from 53% to 60%. York also projects that seat-miles offered by LCCs will grow 72% by 2020, compared with growth of only 27% by legacy carriers. The study was commissioned by the European Low Fares Airline Association.

California Senate Aims to Block Ontario Privatization
In May, the California Senate approved a bill that would create a local public-sector operator for Ontario airport. The City of Ontario, in which the airport is located, sold it to Los Angeles World Airports in 1985, but the bill would apparently force LAWA to give it to the new entiry. LAWA earlier this year invited expressions of interest in leasing the money-losing airport, under the federal Airport Privatization Pilot Program. Prospects for the Senate measure in the Assembly are unclear.

Quotable Quotes

“The existing regulatory structure prohibits airports from evolving to more-effective business models and financing models that have proved to be successful all over the world. And that is the frustration, because airports all over the country are faced with lower federal grants, the inability to raise the passenger facility charge, and in many cases reduced airline operations. All of those combined mean it is increasingly challenging just to meet the growing regulatory burden and provide the facilities necessary for the safety and security of passengers. We really need the federal government to get out of our way. That’s really the bottom line.”
--Deborah McElroy, Executive Vice President, Policy, Airports Council International-North America, in John F. Infanger, “State of the Industry Report,” Airport Business, June 2011.

“[W]e’ve institutionalized an irrational phobia against anything smacking of racial or religious profiling. Once you’ve decided that disproportionate scrutiny of certain groups is verboten, you’ll have to hassle everyone equally. Thus, we’re told that a 95-year-old woman’s diaper is just as likely to be the front line in the war on terror as a 22-year-old Pakistani’s backpack. Defenders of the TSA insist that we can’t abandon such mindlessness because if we do, clever terrorists will start using adult diapers as IEDs. Others say we know that profiling isn’t effective because the Israelis don’t use it. Both lines of argument assume security personnel cannot be trusted to be more than automatons, mindlessly acting on bureaucratic programming. If that’s true of the current personnel, it’s not because it has to be. In fact, the reason the Israelis don’t do simple profiling is that they use intelligent profiling conducted by highly intelligent screeners. At Ben Gurion International Airport, everyone’s interviewed by security. Some are questioned at length, others quickly. The controlling variable is the “living judgment” . . . of the interviewers, and not wildly expensive full-body scanners and inflexible checklists.”
--Jonah Goldberg, “Rage Against the TSA Machine,” Los Angeles Times, June 28, 2011.

“[Risk-based security] is a paradigm shift for the agency . . . the vast majority of passengers pose little or no risk of committing a terrorist act. That is a change for the agency. Until this time, fundamentally, the officers have been told that everybody is a potential threat. It’s important to look at the technology and everything TSA is doing through the lens of risk-based security.”
--John Sanders, TSA Deputy Assistant Administrator, quoted in Brad McAllister, “AAAE Follow-Up,” Airport Business, June 2011.


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


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