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Reason Foundation

Airport Policy and Security News #99

TSA leaves third-party PreCheck companies in the lurch, Airport expansion and noise compensation, The no-reform TSA budget proposal

Robert Poole
April 7, 2014

In this issue:

TSA Leaves Third-Party PreCheck Companies in the Lurch

On March 7th, shortly after the last issue of this newsletter went out, TSA abruptly halted its previously much-touted Third Party Prescreening program that was aimed at supplementing the agency's own efforts to sign up new members for PreCheck. The TSA's current PreCheck program allows air travelers who have not been invited by their primary airline (as high-level frequent flyers) to apply in person at various sign-up locations, be fingerprinted, and submit to an FBI criminal history background check; if they pass, they pay an $85 fee for a five-year PreCheck "membership."

TSA announced the Third Party program early in 2013 as a way to expand the reach of PreCheck recruiting, by inviting companies experienced in large-scale data research to submit "white papers" explaining how they would go about recruiting potential PreCheck members and how they would vet them as low-risk. TSA's Feb. 25, 2013 Industry Day explained the aim of the program as seeking "solutions to accurately assess risk to the transportation system and to pre-screen passengers at a high degree of confidence in order to increase expedited physical screening." TSA was concerned about not meeting its ambitious goals for shifting large numbers of passengers to expedited PreCheck lanes, so it invited innovative ideas from the private sector.

TSA explained that candidate private sector firms would have to partner either with an existing TSA-regulated party (airport or airline) or become directly regulated itself. The companies were to come up with their own method of risk assessment (algorithms), which would have to be approved via TSA testing. Each would come up with its own marketing plans, recruitment locations, proposed fees, etc.

TSA selected three of the white papers and authorized those firms to proceed to Phase II—developing and testing their algorithms with TSA-provided datasets of passenger names, as well as further developing their conceptual marketing and business plans from what was sketched out in their white papers. This would be followed by Phase III—Live Prototyping—by early 2014. The participating firms did their planned work, and were expecting the go-ahead for Phase III. But TSA's terse March 7th "Amendment 6" to the project definition stated that Phase III "will not take place. Instead, the government will continue to explore proposed solutions in a non-operational environment to perform analysis and information gathering," through June 30th. And it concluded by saying that "If there is a TSA decision in the future to proceed with requirements for Third Party Pre-Screening it will be posted on [the] Federal Business Opportunity web site."

Speculation is rife about what caused this abrupt about-face by TSA, in a program that had received strong verbal support from TSA Administrator John Pistole. In trying to assess why this occurred, I have talked with a number of aviation security people, all of whom asked me not to quote them by name or affiliation. So what follows is a somewhat redacted version of detailed interview notes.

First, here are the speculations I've encountered. One idea is that a group of influential TSA managers is opposed to the program, and used their influence to persuade Pistole to approve a time-out. Another is that higher-ups in the Administration expressed concerns to TSA, due to the PR beating they have taken over NSA surveillance and under pressure from civil liberties groups saying Third Party Pre-Screening amounts to "profiling," Indeed, several such groups cheered the March 7th announcement, portraying the companies' data-mining algorithms as spying on social media, etc. to link it in people's minds with NSA surveillance. A third hypothesis is that the company that TSA hired to operate its own $85 PreCheck recruitment program felt threatened by the possibility of more-effective competition and lobbied to kill the Third Party program. And fourth, some speculate that the airlines don't like the idea of changing PreCheck from a perk for their best frequent flyers into something potentially available to a vastly larger group of air travelers and likewise lobbied to kill it. Let me hasten to add that I have no evidence for any of these hypotheses; I'm just reporting the scuttlebutt that is out there.

Next, based on what I've learned by talking with knowledgeable individuals, here is the case for proceeding with Phase III's "live prototyping"—i.e., having companies whose algorithms passed TSA's testing use them in the actual recruitment of applicants during a limited time period to further verify TSA's own testing with passenger data it provided them.

In principle, this is similar to what credit providers do when people apply for a credit card, a mortgage, or any number of other services that require assessing the riskiness of an applicant. And like credit reviews, this is a voluntary process, as is applying for Global Entry or the $85 PreCheck program offered by TSA's contractor.

At last week's U.S. Chamber of Commerce Aviation Summit in Washington, DC, Administrator Pistole was one of the speakers. I asked him about the future of Third Party Prescreening, given that he had mentioned increased roles for third-party vendors in expanding PreCheck. He replied that he hoped to see some of this implemented, but gave no time frame. He also referred to the current contractor's $85 program as "retail" recruiting that has signed up about 140,000 people thus far, and called the proposed third-party program a "wholesale" approach with the potential for much larger numbers. My conclusion is that Pistole himself still supports the program—but the reasons for the current hold remain unclear.

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Airport Expansion and Noise Compensation

A major factor in preventing busy airports from adding runway capacity (and threatening the survival of general aviation airports like Santa Monica) is noise exposure. February saw riots in France, where a proposed new airport has been fought for more than a year by a group that includes local farmers, residents, and greens. Noise exposure is the largest factor in local opposition to adding one or more runways to capacity-constrained London Heathrow. And such opposition has made it politically unthinkable to propose expanding the runways of severely constrained LaGuardia.

I think the aviation community should give more thought to serious proposals to better compensate airport neighbors for increased noise exposure. Airport owners and their airline customers need to take noise compensation more seriously as a cost of doing business.  So I'd like to call your attention to a study called "Depoliticizing Airport Expansion," by Kristian Niemietz. It was released in December 2013 by the Institute of Economic Affairs, a well-respected think tank based in London. (www.iea.org.uk/publications/research/de-politicising-airport-expansion)

As Niemietz explains, the basic idea is that an airport planning to expand would have to obtain permission from all the city councils whose residents would be affected. This would be required if an independently estimated noise threshold would be exceeded once the expansion took place. For those saying no, the airport company would have the right to demand a referendum, with a commitment to pay the council $X per noise unit, which would reduce the local tax bill by a specified amount. The proposed compensation level would be up to the airport to specify. Niemietz goes on to examine some of the tricky details that would need to be addressed in working out a practical way to implement the basic idea. For example:

Not raised by Niemietz is the alternative of compensating individual property owners, rather than their local governments. I wrote about such a proposal in Issue No. 77, March 2012. Thierry Brechet and Pierre Picard of Catholic University of Louvain in Belgium authored "The Price of Silence: Tradable Noise Permits and Airports." Under their model, groups of residents in various noise exposure zones would be granted a property right to noise exposure no greater than X. A representative in each zone would act on behalf of the owners, authorized to submit their proposed price for permits allowing aircraft activity that exceeded X. The other party to these transactions could be the airport, the air navigation service provider (ANSP), or the airlines serving the airport. Unlike Niemietz's proposal, noise compensation permits would be ongoing, but they would be re-auctioned periodically to reflect either increases or decreases in measured noise exposure over time. (http://ssrn.com/abstract=1010621)

These proposals would be a big change from current practice, but something like this is needed to reach win-win solutions over needed airport capacity expansions, so that they don't impose large costs on unwilling airport neighbors to benefit air travelers, airports, and airlines.

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TSA Budget Proposal: No Reform Here

I've tried, but it's difficult to find anything to praise in the Administration's proposed FY 2015 budget for TSA. First, it calls for yet another increase in the passenger security tax. Of the $11.5 billion this would raise over 10 years, $5.4 billion would go to the general fund, adding nothing to aviation security. And in another example of a shell game, the budget would also reinstate the airline security tax that was repealed last year, in exchange for last year's increase in the passenger security tax.

From the standpoint of policy reform, there will be a minor (2%) reduction in the budget for what is estimated to be a 3,500 Federal Air Marshals workforce, a program that is hugely less cost-effective than the Federal Flight Deck Officer (armed-pilots) program, which is proposed for a 19% reduction in its already tiny budget. There is not a word anywhere in the budget about eliminating—or at least sharply cutting back—the totally unproven Behavior Detection Officer workforce of about 3,000. And the agency's scary VIPR (Visible Intermodal Prevention and Response) teams are increasingly being moved into airports, instead of doing random searches at bus stops, ports, train stations, and sports stadiums. Rep. Scott Garrett (R, NJ) last year proposed legislation that would toll back TSA's authority to do random searches in surface transportation settings.

The one TSA issue on which a number of Congress members seem exercised is expanding outsourced security screening. Rep. John Mica (R, FL) plans legislation to privatize all federal screening within two years. Pressure from Congress has thus far saved the program from being frozen, and six airports that have applied in the last two years have been approved (including Orlando Sanford in Mica's district), but are still waiting for TSA to assign them to the security firm it thinks best for each. The TSA budget proposal calls for a token 2.3% cut in the Privatized Screening line item, which seems inconsistent with adding six airports to the program.

The only meaningful change in the budget is the proposed decrease in screener numbers to 50,318, from the current 52,580. That decrease is premised on the success of TSA's planned expansion of PreCheck, which will reduce the average processing time at checkpoint lines, requiring fewer total screeners.

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Could Detroit Support Two Airports?

With nearby Detroit Metro Airport (DTW) serving as a major Delta hub, as well as serving legacy carriers American and United plus Southwest, is there any future for city-owned Detroit City Airport (Coleman A. Young Municipal—DET)? That possibility was raised at a February 20th workshop on Detroit's assets sponsored by the Reason Foundation. In order for DET to be attractive to investors, it would have to define and meet the needs of one or more market niches that are not being served by Detroit Metro.

Let's look first at DET's advantages. It is only five miles from the somewhat-reviving downtown, compared with 20-some miles for DTW. It might be attractive to super-low-fare carriers such as Allegiant, which tends to link underserved airports with vacation destinations, and the refocused Frontier. It might also have some attraction for downtown business flyers were JetBlue or Virgin America to offer service there. With its main runway only a bit over 5,000 ft., DET would initially be limited to narrow-body planes flying short to medium-length routes. And even with needed renovations, DET might offer a lower cost per enplaned passenger if it were able to attract a critical mass of airline service.

A different market niche was proposed by homebuilder Rodney Lockwood: refocus DET on cargo, via a lengthened runway and a low-tax environment for the surrounding Jefferson Avenue area. Lockwood envisions a multi-model freight center taking advantage of the airport, nearby freeways, railroads, and the Detroit River. Under Lockwood's proposal, the city would create a public-private partnership that would take title to all city-owned assets within the zone (including DET), with five shareholder groups, mostly creditors, and the city also owning a stake. Land sales would provide an initial revenue source, and the anticipated economic development would increase property values over time. (Lockwood had earlier proposed turning city-owned Belle Isle into a kind of super enterprise zone, but the city rejected that proposal.)

There have been many attempts to create freight-oriented logistics centers. The only successful one that I know of that's anchored by an airport is Alliance in Fort Worth, created by Ross Perot, Jr. Most of the others have turned out to be white elephants. All the other successful multi-modal freight centers seem to have been developed by freight railroads.

The capital program recently put forth by Detroit's emergency manager Kevin Orr allocated $28.5 million for DET, mostly to renovate general aviation hangars as well as making modest improvements to the passenger terminal (which used to serve Southwest before it moved to DTW). The money would come from the city's proposed bankruptcy settlement. A small part of the money would be used to revise the airport's master plan. At present, the airport has an operating deficit, estimated to be $600,000 for 2014—a drain the bankrupt city can ill-afford. The Detroit Free Press on April 5th also reported that city officials are talking with "two unidentified start-up regional carriers" about starting scheduled passenger service at DET.

It's pretty clear that any proposed transformation of DET would be a high-risk proposition, so a priority should be structuring any such deal to minimize risks to the remaining taxpayers of Detroit.

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TSA Rejects Arming Screeners

In the aftermath of November's shooting attack at LAX that killed a TSA screener, the screeners' union (American Federation of Government Employees) called for creating a new category of armed screeners. But after it consulted with a large array of aviation stakeholders, TSA has rejected that proposal. Instead, its March 26th report made 14 recommendations to more effectively deal with the threat of "active shooters" at airports. In particular, it called for armed law enforcement officers (local police or airport police, if an airport has them) covering security checkpoints during peak periods.

Other recommendations include mandatory screener training and exercises to prepare them for the active-shooter threat, ensuring that all TSA wireless devices are programmed with the airport's emergency number(s), weekly testing of panic alarms at airports (and more alarms where warranted), plus linking the panic alarms to airport security cameras, to guide first responders to the location of a shooting threat.

The LAX shooting raised a number of examples of poor coordination between the TSA screening operation and the rest of the airport's security systems. Not having panic alarms linked to the airport-run closed-circuit TV system is one example; another is the failure of 911 calls at LAX to be routed directly to airport police. These are examples of the lack of integration of airport security as it is currently organized. Thanks to Congress in 2001 giving TSA the primary role of checkpoint and baggage screening, it operates as a separate presence at each airport. All the rest of airport security—access to sterile areas, perimeter protection, lobby security, etc.—is the airport's responsibility. To be sure, TSA has a (proper) regulatory role over those non-TSA aspects of the airport's security. But this kind of divided operation is inherently suboptimal, compared with the kind of integrated security that is typical of European airports.

The fundamental flaw, as I have pointed out in congressional testimony and in this newsletter, is that TSA was created with the dual roles of aviation security regulator and airport screening provider. That creates a conflict of interest in that when it comes to baggage and passenger screening, TSA regulates itself. But it also creates divided security responsibilities at the airport, when unified security would almost certainly be more secure.

Hence, if and when Congress ever decides to get serious about devolving the screening function to airports (letting them perform it with either their own TSA-approved staff or purchase it from a TSA-approved screening firm), they would not only be removing TSA's conflict of interest; they would also be promoting unified security at each airport.

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News Notes

North American Trusted Traveler Program Announced. During the North American Leaders' summit in late February, the governments of the Canada, Mexico, and the United States announced plans to develop a common trusted traveler approach for travel among the three countries. It will begin with mutual recognition of the existing Global Entry, NEXUS, and Viajero Confiable programs that provide expedited immigration clearance for returning travelers.

New Airport Privatization Report. The Air Transportation chapter of Reason Foundation's 2014 Annual Privatization Report was released in mid-March. It includes a recap of last year's developments in airport privatization (U.S. and global), U.S. aviation security, and air traffic control. Go to: http://reason.org/files/apr-2014-air-transportation.pdf.

Kansai Airport Sale Moving Closer. The Japanese government last year enacted legislation permitting the sale of both Kansai and Osaka Airports (which operate as a single company). At an Airports Council International conference in London in March, Ferrovial expressed interest in the prospect of acquiring this airport company. Inspiratia Infrastructure (an online news service) reports that the company could be worth $15 billion. It would be Japan's first airport privatization and one of the largest such transactions to date.

Paris Airport Express Project Revived. A long-stalled project to provide a fast rail link between central Paris and Charles de Gaulle Airport is now the subject of a new feasibility study, assuming no government subsidy and some kind of user-funded financing model. The project cost is estimated at $2.4 billion. The study will be carried out by a joint venture of French railtrack owner RFF, Aeroports de Paris, and the Transport Ministry.

Two Privatized Airports Are Refinancing. Budapest Airport and Copenhagen Airport Denmark, both majority-owned by investors,  are refinancing their current debts to stretch out maturities and take advantage of still-low bond interest rates. Copenhagen completed a $1.05 billion refinancing in February and Budapest is under way on a $1.4 billion refinancing. The largest owners of Copenhagen are Ontario Teachers' Pension Plan Board and Macquarie European Infrastructure Fund 3. Budapest's largest shareholder is Canada's Public Sector Pension Investment Board.

Robert Aaronson Now Chairs Propeller Airports. Propeller Airports, the subsidiary of Propeller Investments that is developing Silver Comet Field as Atlanta's second commercial airport, has recruited industry veteran Robert Aaronson as its chairman. Aaronson is a former CEO of the Air Transport Association and former Director General of Airports Council International in Geneva. Among the major airports he has headed are the three New York-area airports of the Port Authority of New York and New Jersey. He has also been a senior FAA official and an executive with the former Lockheed Air Terminal (which became Airport Group International).

City of Santa Monica Strikes Back. Despite losing in federal court on its claim that federal restrictions on shutting down Santa Monica Airport no longer applied, the Santa Monica City Council voted unanimously on March 25th to take control of "the city-owned portion" of the airport (whatever that means) with the intent of either reducing the length of its runways or shutting them down. Thus, the battle over the future of this key general aviation airport will continue.

Further Privatization Developments in India. March brought mixed news for would-be privatizers of Indian airports. First, the City & Industrial Development Corporation of Maharashtra announced an April 2nd "industry day" for would-be private developer/operators of the new airport for Mumbai (Novi Mubai International Airport). The huge new airport is to have the capacity for 60 million annual passengers by 2030. But three days later, the national government's Ministry of Aviation announced that bidding for six other airports planned for modernization via long-term concessions would be postponed until after India's national elections in April-May.

FAA Releases Further Categorization of GA Airports. In May 2012 the FAA released its national asset study which assigned over 2,400 general aviation airports to one of four newly defined categories (national, regional, local, and basic). But that report left 497 such airports about which the agency had insufficient information to assign them to a category. On March 20, 2014 FAA released ASSET 2: In-Depth Review of the 497 Unclassified Airports. The new report was only able to categorize 212 of the 497, leaving 281 with no clearly defined federal role in the National Plan of Integrated Airport Systems (NPIAS).

Vietnam Plans Privatization of 22 Airports. The government of Vietnam in March announced that it will privatize the Airports Corporation of Vietnam (ACV), which owns and operates the country's 22 principal airports. A key goal of the privatization is to gain funding for airport expansion and modernization, including development of a major new international airport (Long Thanh International), which it hopes will begin construction in 2016 and open with a capacity for 25 million annual passengers by 2022.

Offer for Two Italian Airports. Corporacion America, the Argentine firm that holds the long-term concession to operate that country's major airports, has made an offer to purchase all remaining shares of two Italian airports in which it already owns minority stakes: Florence (where it owns 33.4%) and Pisa (27.3%). It is offering $110 million for the remaining shares in Florence and $55 million for the remainder of Pisa.

Concession for Zagreb Airport Reaches Financial Close. In exchange for replacing the aging passenger terminal with a new one capable of handling 5 million annual passengers (vs. 2 million today), a consortium has closed the deal for a 30-year concession for Croatia's largest commercial airport, Zagreb Airport. The consortium is led by Aeroports de Paris Management, French developer Bouygues Batiment International, and TAV Airports from Turkey.

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Quotable Quotes

"I look at Detroit City Airport and think it is a jewel that nobody's polished. Our idea is that it could be the thing that revitalizes that entire area. The airport has huge value both as a facility and also in terms of revitalizing that whole area of Detroit."
—Michael Boyd, Boyd Group International, in John Gallagher, "Detroit Bankruptcy Plan Calls for Revitalizing Detroit City Airport, Detroit Free Press, April 4, 2014

"Canada's airports would like to see an increased focus on innovation. Airlines and federal agencies collect a great deal of personal information about passengers. Canada needs a more sophisticated approach to centralizing this information and making better use of it to address risk. Over time, this approach should shift security screening regulations to focus on passengers we know nothing or very little about, leaving those better-known travelers to proceed through a system with minimal inconvenience."
—Daniel-Robert Gooch, President, Canadian Airports Council, "The Balancing Act of Security Screening in Canada," Centerlines, March 2014

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


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