Air Traffic Control Reform Newsletter #19

Topics include: overhauling the ATO, modernizing oceanic ATC systems, delays resulting from aviation system limitations, and modernization budget cuts.
In this issue:

Chew Begins Overhauling Air Traffic Organization

"The Federal Aviation Administration has lived with serious operational and long-term structural problems for far too long . . . and has not been able to modernize efficiently. At best, I have often referred to the FAA as a dysfunctional federal agency." - Rep. John Mica (R, Fla.)

With that assessment from the head of the House Aviation Subcommittee setting the stage, former American Airlines official Russ Chew launched the new Air Traffic Organization within FAA on February 8th. Well aware of the challenge of attempting to turn a slow-moving bureaucracy into a customer-focused service business, Chew lost no time visiting other ATC organizations that have made the transition successfully. In January he visited Nav Canada, and in February Britain's NATS and Germany's DFS.

And at the end of March Chew shared the stage with Nav Canada CEO John Crichton and DFS CEO Dieter Kaden. The venue was the Air Traffic Control Association's Technical Symposium in Atlantic City. This year's conference was cosponsored by the FAA and Nav Canada, underscoring the importance of ATC reform and the lessons to be learned from corporatized providers overseas. Both Kaden and Crichton gave impressive presentations on how they have been able to transform their respective organizations. Kaden told of replacing half of the senior managers and bringing in three of his four top managers from the private sector. He reviewed newly introduced measures of performance, and noted that thanks to increased efficiency from streamlined management and facility consolidation, DFS has been able to cut its rates five times in 10 years, and is charging users less in 2004 than it was in 1993. His Powerpoint presentation also showed a dramatic reduction in near-collision incidents since DFS's start-up in 1993.

Crichton told a similar story of Nav Canada's transformation since 1996, as the world's second-largest ATC provider (after DFS). He, too, related that 50% of senior management couldn't make the transition and were given golden handshakes. "It had to happen," he said, in order to change the corporate culture. He noted the importance of changing from cash accounting to accrual, to understand what things really cost. And he pointed out how different it was to go from a situation in which the Minister of Transport was the "customer" to today's situation in which "We have real customers and they pay us." And he noted that although total head-count has shrunk from 6,300 to 5,450, controller numbers have increased (to correct previous under-staffing), and controller compensation is up 50% since 1996.

Those were hard acts to follow, given that Russ Chew is only a chief operating officer, not CEO; that his ATO is still part of the FAA bureaucracy (and even headquartered in the same building); and especially that the ATO still must get its revenue from Congress rather than from its actual aviation customers. Still, he gave a strong presentation of the challenge he's taken on and his initial game-plan for dealing with it. Besides appointing a new team of vice presidents and reducing the number of layers of management, he is focusing on completing the implementation of the long-delayed accounting system and using the data it produces to identify who uses which ATC services, and what it costs to deliver each service. Those are certainly all necessary steps. But whether they are sufficient steps is another whole question.


Oceanic Modernization Still at Risk, Says Inspector General

One of the key lessons learned by customer-focused ATC corporations overseas is that they are often better off buying commercial, off-the-shelf (COTS) technology that meets 95% of their requirements rather than designing the perfect system from scratch. Especially when doing the latter means cost-plus contracts for the technology providers. These points are at issue in the continuing saga of FAA's attempts to modernize its oceanic ATC systems.

Since there is no radar coverage over the oceans, historically planes were kept very far apart and reported their positions by voice, using often unreliable high-frequency (HF) radio. Controllers kept track of planes' positions on paper flight strips. In recent years, GPS technologies and digital data-link communications have permitted dramatic improvements, with systems of that kind pioneered by ATC corporations such as Airways New Zealand and Nav Canada. So when the FAA pulled the plug on a previous behind-schedule, over-budget new oceanic system about five years ago, it appeared to be doing two things right. First, it picked a Lockheed-Martin proposal to adapt New Zealand's proven oceanic system. Second, it negotiated a fixed-price contract, since all L-M had to do was adapt this proven COTS technology.

When I first wrote about this two years ago, Inspector General Ken Mead was already sounding the alarm, noting that huge amounts of new software were being written and suggesting that FAA had not given fair consideration to an offer from Nav Canada to purchase its COTS technology, called Gander Automated Air Traffic System (GAATS), at about half the cost. At the time, the FAA's Monte Belger chided me for alarmism, and said FAA was on schedule to have the L-M system (called ATOPS) in initial operations at Oakland by April 2003.

Well, it's a year later and nothing is operational. IG Ken Mead issued a status report last month, noting that ATOP "has experienced some serious and unexpected software development and testing problems," thanks to FAA insisting on extensive customization of the New Zealand system. And he sounded the alarm that the FAA has now amended the contract to pay for an additional $11 million in software work. That's only a small amendment, as FAA contracts go, but more alarming is the fact that solving any problems identified after February 2005 will be paid for by the FAA - i.e., back to cost-plus contracting, after all.

Meanwhile, Nav Canada's highly successful GAATS is being adapted for use by the UK's ATC provider, NATS, in a project that began in February 2003. NATS's version will be called the Shanwick Automated Air Traffic System (SAATS), and will provide a seamless interface with GAATS over the North Atlantic.

Ironically, it turns out that L-M's New Zealand system is based on Nav Canada's GAATS. But it's a very old Version 14, compared with the current Version 21 in use by Nav Canada and being adapted for SAATS. So no wonder L-M is having to write 93% more lines of code than expected.

Footnote: Controllers union president John Carr's newsletter reports that L-M officials told him they had "pulled out of co-sponsoring the [Air Traffic Control Association] technical exhibit in Atlantic City as soon as Nav Canada was accepted as a sponsor." I'll let you connect the dots on that one.


It's the System, Not the Weather!

Kudos to the U.S. Department of Transportation for shedding new light on the causes of flight delays. As reported by Scott McCartney in the Wall Street Journal (April 21, 2004), the DOT is now compiling the causes of flight delays in a more sophisticated manner. And by that new categorization, the "aviation system" (i.e., limitations of the ATC and airport system) was responsible for 43% of all delays between September 2003 and March 2004. Extreme weather events accounted for only 2.6%.

Several years ago at the height of summer delays in 1999 and 2000, when the major airlines started speaking out in favor of serious ATC reform (such as corporatization), defenders of the status quo routinely shot back that most flight delays were due to "weather." And in a superficial sense, that's true. Fog and rain can cut the arrival rate at runways in half, compared with good visibility conditions. But that's mostly because there either aren't enough runways or they and the planes using them don't have the latest technology for operating safely under such conditions. As McCartney points out, "weather does expose the weaknesses in the air traffic control system."

So to that extent, the new way of reporting delays will further the cause of ATC reform. Well-done, DOT.


Do "Modernization" Budget Cuts Make Sense, After All?

Last issue I criticized the just-announced cut of nearly $400 million in the FAA's capital investment budget for FY2005, noting that a modernization program funded by long-term revenue bonds wouldn't be held hostage to the federal budget deficit. But I received considerable feedback suggesting that the actual program cuts (announced a few days later) were long overdue.

Several insiders reminded me that only one issue before, I'd suggested that the costly LAAS program might be obsolete before it was even fielded, and was a worthy target for the axe it's just received. Another suggested that NEXCOM, which was cut back by two-thirds but kept alive, should be cancelled because "it has no support either among [aviation] users or the rest of the international community." Two insiders suggested that further budget pressures may finally push the FAA to implement the Inspector General's recommendation not to install the very costly STARS upgrade in every facility, but substitute the far more cost-effective Common ARTS in all but the largest ones. This could save as much as half a billion dollars.

And another observer noted what an economist would call the "opportunity cost" of keeping boondoggle systems in the pipeline. By doing so, he wrote me, FAA is "pushing out the ability to add decision support tools in the terminal areas" that would add much-needed capacity on approaches to congested airports. In other words, spending money on bad programs means it's not available to spend on good ones.

I have to agree, and so does DOT Secretary Norm Mineta. In Senate testimony last month, responding to criticism of the planned cuts, he said the cuts involved "programs that, frankly, needed to be shelved." As Russ Chew gets further up to speed figuring out what things cost and what they will or will not do for users, let's hope there are many more such decisions.


Must FAA Provide Local Air Traffic Control?

One of the interesting consequences of the proposed cutbacks in FAA's "Facilities & Equipment" budget is the agency's proposal that another possible source of funding for ATC improvements at airports could be the well-funded program for federal airport grants, known as the Airport Improvement Program (AIP). Although AIP has traditionally funded runways and other airport infrastructure, the FAA now suggests that local ATC improvements, such as new Instrument Landing Systems, new weather systems, and collision-avoidance systems, could be funded by AIP, if airports choose to apply for such purposes. Associate Administrator for Airports Woodie Woodward pointed out that an airport needing such equipment could "get it quicker through AIP."

But why stop at just equipment? Does local (airport) ATC have to be provided by the national ATC service provider? Turns out that's not required in some of the countries that have corporatized ATC. In the U.K., for example, there are 70 airports with control towers. Of those, the national provider (NATS) runs the towers at only eight, the largest of which is Manchester (where NATS just won a five-year contract). Most large air-carrier airports, all of which have been privatized or corporatized over the past 15 years, operate their own towers. That includes BAA's airports Heathrow, Gatwick, Stansted and four others; the four Peel Group airports including Liverpool; and the two TBI airports Luton and Belfast. Serco, which operates many of the U.S. contract towers, runs towers at 11 U.K. airports.

Dieter Kaden of DFS told the ATCA conference attendees that control towers in Germany will be deregulated next year. They are already open to competition in New Zealand, and Australia has been debating this step.

So rather than splitting hairs over whether a few more VFR towers might be added to the 219-airport Contract Tower program, how about a real debate? How about giving all U.S. airports the option of contracting with the ATO, or with a private company, or operating their tower themselves?


News Notes

More ATC Corporations. Three more countries have made the shift from government agency to self-supporting ATC corporation in recent months, according to CANSO News, the newsletter of the Civil Air Navigation Services Organization (www.canso.org). The newcomers, all now qualifying as Full Members, are LFV Sweden, Malta Air Traffic Limited, and National Air Navigation Services Company of Egypt. There are now 34 Full Members, including the ATC corporations of Australia, Britain, Canada, and Germany.

Military Contract Towers. Often lost sight of in last year's bitter debate over whether or not to expand the FAA's highly successful Contract Tower program is the extensive use of contract towers by the military at U.S. air bases. Early this year, that effort expanded overseas, as the Air Force Contract Augmentation Program selected Midwest Air Traffic Control Services, Inc. to provide ATC and airfield management support services at military bases throughout Central Asia. The current contract covers air bases in Afghanistan, Kyrgyzstan, and Uzbekistan, as well as regional management activities in Qatar. Midwest is one of the three companies operating airport control towers under the FAA's Contract Tower program. If the military is expanding its contract towers (even in combat zones!), why shouldn't the FAA?

NATS Doing Much Better. Last year's refinancing of the U.K.'s National Air Traffic Services put the company on a firm financial footing, according to the British National Audit Office. Its January report found that the public-private company now has a strong buffer of cash reserves to help cope with any future unexpected crises. And it is now in a much stronger position to proceed expeditiously with its 10-year modernization plan. And the results are already showing up in NATS' performance. With air traffic finally increasing (March was 3.4% ahead of year-before levels), ATC-related flight delays for 2003 were at their lowest levels in nearly a decade-just 0.68 minutes per flight, on average, compared with 2.17 minutes the previous year. That's due in part to the reorganization of airspace east of London, as well as software improvements and better working relationships with staff.

Spirit Educates Passengers on ATC Delays. To attend the ATCA conference in Atlantic City, I flew Spirit Airlines for the first time. And I was pleasantly surprised to find a seat-pocket insert explaining the types and causes of ATC delays. It's a well-done little piece, and it illustrates the potential of airlines to educate frequent flyers on the need for ATC reform. Although low-cost carriers have contributed significantly to the democratization of air travel, I'm sure it's still the case that people who fly (especially frequently) are, on average, better educated and more politically active than those who don't. They are prime audience for more such educational material.

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





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