Air Traffic Control Reform Newsletter #31

Topics include: NATCA's critique of ATC user fees; real progress on terminal-area capacity; thoughts on controller contract negotiations; and ATC commercialization's impact on Canadian bizjet sales.
In this issue:

Spurious Arguments Against Charging for ATC Services

A recent report by aviation consultant Darryl Jenkins, commissioned by controllers' union NATCA, attempts to stir up fears that shifting from excise taxes to user fees for U.S. air traffic control would be a risky scheme. It's titled "Turbulence Ahead: How User Fees Could Ground the FAA," and was released on Dec. 7th. Needless to say, it's being touted by those desperate to cling to the status quo of a politicized, tax-funded system—a model that's been abandoned everywhere else in the civilized world.

The report is mostly rhetoric, with almost no analysis and very few numbers. And it almost entirely ignores the worldwide wave of ATC reform of the past 15 years. A brief review of its principal conclusions will show you what I mean.

First, Jenkins points to economic downturns, when fewer flights would mean less ATC fee revenue, thereby leading to rate increases when airlines could least afford it. True, there were some ATC fee increases during the post-9/11 downturn. But the industry learned from that, and there is widespread understanding of the need for reserve funds (such as Nav Canada's Rate Stabilization Fund) to minimize the need to increase rates during downturns. And the report also ignores the huge difference in response to the post-9/11 downturn by FAA compared with the commercialized air navigation service providers (ANSPs) overseas. The ANSPs all put serious cost-cutting measures in place�deferring capital expenditures, reducing administrative overhead, etc., while the FAA went on spending money on a business-as-usual basis.

Next, Jenkins raises the specter of airlines in Chapter 11 avoiding the payment of fees, leaving their competitors to make up the shortfall. But Nav Canada, for example, monitors the financial condition of its airline customers and can put them on a cash basis when necessary (just as fuel suppliers do). So this is not really a problem for ANSPs.

Another point repeated several times is that, contrary to FAA presentations about inadequate ticket tax revenues, both passenger volumes and fares are increasing. Here is where the report cries out for quantitative analysis—e.g., alternative 10-year projections of excise tax revenue versus Air Traffic Organization (ATO) expenditures. But there is no number-crunching of any kind, just empty rhetoric. Respected analyst Vaughn Cordle of Airline Forecasts points out that Jenkins is referring solely to a short-term uptrend in yields over the past few months, but notes that considering the 12 months of 2005, domestic yields were up just 1.9% from 2004 levels, which is negative real growth after correcting for inflation of 3.4%. Cordle expects the uptrend to continue for awhile in 2006 but to resume the historic downtrend by 2007. He concludes, "Bottom line: Trust Fund revenue growth will not keep pace with FAA costs under the current tax structure."

The Jenkins report also repeats the silly line being peddled by general aviation groups that billing thousands of individuals and corporations for ATC services would be a costly bureaucratic nightmare. I'll have to agree that I wouldn't hand this task to the FAA bureaucracy, but the shift to a user-fee supported ATO is concomitant with making that entity into a commercialized ANSP like those in Australia, New Zealand, Canada, Germany, the U.K., etc. It would be free to purchase billing expertise from the private sector, or even outsource this function to American Express or other providers. And as I reported in Issue No. 30, the actual cost of billing in Europe and Canada is trivial—a fraction of one percent of the amount billed.

The report is also behind the times in claiming that low-cost carriers (LCCs) oppose reforming ATC and making the ATO self-supporting. That was the case in the late 1990s, when there was a huge disparity in fare levels between LCCs and network carriers. That meant that shifting from fare-based ticket taxes to transaction fees would have significantly increased what LCCs paid vis a vis their network competitors. But LCC competition exists on the large majority of all routes these days, meaning that fare levels are much closer. And all the discussions I've had with airlines over the last six months indicate that LCCs and network carriers are on the same page on ATC reform—including funding reform.

Finally, the report mischaracterizes the case for user fees by portraying the primary goals as greater "fairness" and additional revenue. Economist Dorothy Robyn was involved in those debates as a staff member of the National Economic Council in the Clinton White House. She told me, "Someone who read only the Jenkins report would get an extremely distorted view of the longstanding debate on user fees—a debate in which the Council of Economic Advisers, the Congressional Budget Office, and other sources of unbiased analysis have argued for ATC user fees as a way to create incentives for more efficient behavior by both the ATC provider and the users of its services." The Jenkins report never mentions either efficiency or incentives.


RNP Technology to Increase Terminal-Area Capacity

One of the goals of the Next Generation Air Transportation System (NGATS) is to increase the functional capacity of airspace. Using technology to keep much better track of where planes are and where they are going, and how to more easily and efficiently keep them on safely separated tracks to different airports or runways will make it possible to better use airspace. This can allow reduced aircraft to aircraft separation, better and safer aircraft separation from terrain or obstacles, more flexible avoidance of bad weather, more direct and efficient flight tracks, lower noise effects on communities, as well as reduced air traffic service cost, while increasing airport capacity. Among the tools for doing this are the sophisticated flight management system (FMS) computers on board most airliners and more precise positioning information available from GPS, barometric vertical navigation, and other related sensors.

The first step in this process is called area navigation (RNAV), in which planes can more readily fly on direct, pre-programmed routes instead of having to overfly various irregularly placed navigation aids on the ground. Many navaid and route locations were largely set in the 60s, by inefficient legacy facility installation requirements dating often to well before the 1940s.

The ability to do RNAV flying has been around for a long time; some airliners have been retired without ever having made full use of their RNAV capabilities. But faced with increased airspace congestion in terminal areas (approaches to and departures from airports), the FAA has finally begun implementing RNAV procedures at major airports. Atlanta and Dallas/Ft. Worth are two of the early ones. Last April Atlanta began using 13 RNAV standard instrument departures (SIDs), and Dallas launched 16 of them in September. RNAV standard terminal arrival routes (STARs) began to be used last year at Philadelphia and Washington Dulles. Both procedures save fuel, and they also cut in half the number of controller-pilot radio transmissions, because the planes fly precise, pre-programmed tracks. The FAA plans to expand the program to the top 35 airports over the next three to five years, which seems awfully slow to some observers.

However, a more advanced version of this idea that has far more near and long term benefit to both operators and the airspace system is called required navigation performance (RNP). RNP not only addresses where the center of the path needs to be as in RNAV, but it also says how wide the path should be, much like a highway lane. The airplane then can stay in its particular lane, both laterally and vertically. By doing this, paths can be safely placed closer together where necessary to increase airport capacity, coordinate paths to and from nearby airports, or avoid some forms of adverse weather. RNP is actually a functional specification of the accuracy required to operate within a certain airspace that, unlike before, can be entirely separate from the kind of specific navigation aids used. For example, RNP 0.1 requires a plane to be equipped to maintain its position within 0.1 nautical mile of the specified path. What is needed for RNP operations is (1) the required level of on-board Navigation equipment and software, and (2) approved RNP procedures at specific airports.

Use of RNP for approach or departure was pioneered by Alaska Airlines, to enable its planes to land under frequent poor-weather conditions at airports like Juneau, using the latest-generation Boeing 737s. That plane was certified for RNP in late 1994, and the FAA approved RNP operations at Juneau in February 1996. Alaska now flies RNP approaches at many Alaska airports, and has pioneered others at San Francisco, Palm Springs, Portland (OR), and Reagan National, as well. Systemwide, Alaska flies about 6,000 such approaches a year. Of those, about 800 are "saves", -meaning the landing would otherwise not have been possible. Those cost savings from avoiding diversions or cancellations are up to $16 million per year. More importantly, the same RNP principles and kinds of procedures used at Juneau to improve runway access and avoid mountainous terrain could also be used to safely separate flight paths, provide more direct routes to save fuel and time, and increase airspace capacity at busy airports such as in New York, Dallas, Chicago, or Atlanta.

So FAA is now moving forward with RNP, having recently identified 75 RNP approaches it would like to introduce over the next three years (25 per year). Many airlines have expressed interest in making use of these new RNP approaches for years. But here we encounter one of those chicken-and-egg problems.

While over 30% of the domestic airline fleet are already RNP-capable (representing a significant fraction of the aircraft carrying mainstream daily passengers), including RNP capability in all new Boeing and Airbus delivered planes, there are very few RNP procedures for airlines to actually use in the US. Until recently the only RNP approaches available were the ones produced by the airline itself. Hence airlines held back on RNP operational implementation and use due to lack of availability of procedures. They also typically wanted common crew training and flight deck procedures across their models, once RNP was implemented. Similarly, they held back on RNP equipment retrofit for other aircraft in their fleet until more RNP procedures were available, and use benefits were readily achievable. But with the FAA under severe budgetary pressures, and supporting other priorities, the rate of RNP procedure implementation is still very low. It's not clear how many RNP approaches FAA will actually be able to deliver over the next few years. To satisfy both growing air transportation needs, as well as to solve critical airspace, capacity, and growing delay issues, it is likely that many 100s of RNP procedures will be needed annually, in the US alone.

That's why we need to pay more attention to private-sector developed RNP instrument procedures, including approaches and departures. In 2003 two Alaska pilots who'd been involved in the RNP work launched a company called Naverus to speed the introduction of RNP. Their launch customer was WestJet, the number two airline in Canada. In a very short period of time Naverus developed and got certified RNP approaches for 21 Canadian airports served by WestJet. Now they are expanding RNP procedure development for Westjet system wide, in conjunction with Naverus having a procedure development authorization by the government of Canada. With authority endorsement, Naverus has also gone on to develop RNP procedures for airline customers in other countries, such as in New Zealand and China.

Aviation consultant Charles Huettner has called for the United States to emulate Canada by allowing RNP procedure design organizations like Naverus to take on a major role. Huettner's suggestion was made in the summer of 2004 (Journal of ATC, July-September 2004), but so far has not been acted upon. If airspace system users and authorities really do ever hope to see substantial beneficial implementation of RNP as a key building block toward a higher-capacity and more efficient airspace system, they should press authorities (e.g., FAA) to go this private sector "Designation" and "Delegation" route. It is time to follow in Canada's footsteps, so that well qualified private entities, as well as traditional airspace service providers, will be able to help provide the very large number of RNP procedures now needed globally, in a timely, efficient, and economic way.


Controller Contract Talks Drag On

You've got to hand it to NATCA president John Carr. He's pulled out all the stops, with a huge media campaign launched last fall called "Fly Us Safe," just coincidentally in parallel with the toughest contract negotiations the union has ever known. NATCA has even hired Ed Gillespie, former head of the Republican National Committee, to tell its story on Capitol Hill. During the summer and fall we were treated to a whole series of one-day stories about ATC glitches, which just happened to coincide with the union's PR offensive.

Against this expensive, professionally run PR effort, the FAA has struggled to tell its side of the story. Here are a few points you might have missed, in the flurry of heroic-controller stories over the past several months:

  • Under the 1998 contract, average controller compensation has increased 68% over the past six years, and total controller compensation went from $1.4 billion in 1998 to $2.4 billion in 2004. "That's so out of line with what's going on in terms of wage increases in every other sector of the economy, as well as the federal workforce," says former DOT Secretary Jim Burnley.

  • Though there were supposed to be large productivity increases to accompany increased pay, they have not materialized. And at major facilities, the average controller is working less than five hours a day on position.

  • The top 100 FAA controllers make $197K (excluding benefits); that's more than the DOT Secretary ($180K), the FAA Administrator ($162K), and the Pilot-in-Command of Air Force One ($137K).

  • And the contract also gave up so many management prerogatives that some major facilities (e.g., New York and Dallas TRACONs) have gotten completely out of control, as reported in previous issues of this newsletter.

There has also been a pattern of NATCA members obstructing the smooth introduction of new ATC technology and procedures. Several examples come to mind. Last fall I spent two hours visiting with a retired senior FAA official, discussing a wide range of aviation issues. When I asked his view of why the highly promising pilot program for controller-pilot data link (CPDLC) in Miami airspace had been terminated, his immediate reply was, "NATCA killed it." When I pressed him, he said that his observation was that the union was systematically resisting the introduction of productivity-increasing (i.e., labor-saving) technology, and this was just one more example. Also last fall, FAA redesigned South Florida airspace to create additional routes to and from the increasingly congested airports of Miami, Ft. Lauderdale, and Palm Beach. The local press here in South Florida was filled with articles quoting controllers who called the plan unsafe and unworkable�but it was implemented anyway and has been a huge success. Delays at Ft. Lauderdale (my home airport) were down 78% from Thanksgiving through New Year's compared with the previous year. Even normally cautious Administrator Marion Blakey told the Christian Science Monitor last summer that the 1998 contract is very restrictive regarding the introduction of new technologies. "The role that NATCA has played there has . . . from time to time significantly delayed new technologies from coming on board."

Fortunately, the FAA still seems to be taking a hard line in the contract negotiations. It's in NATCA's interest for talks to drag on as long as possible, to preserve their lavish status quo. But the law may provide a path toward speedier resolution. If the contract dispute cannot be resolved by arbitration, the FAA can take its final offer to Congress, which would have 60 days to act (or not). If Congress does not act, the FAA may impose that offer. That process is already under way in the negotiations between FAA and the union for technicians who maintain ATC equipment. It's a very plausible outcome of the NATCA negotiations, as well.


Bizjet Sales Cut by Commercialization?

In a meeting I had late last year with a White House official, discussing ATC reform, the subject of Nav Canada came up. (Nav Canada is the nonprofit, stakeholder-controlled corporation that was created out of the ATC staff and facilities of Transport Canada; it's what the FAA's ATO could become, if it were made organizationally separate from FAA, given its own user-fee revenue base, and governed by a board of aviation stakeholders.) The official told me that a group from XYZW (an aviation association that I will avoid naming, to spare them embarrassment) had been in his office and told him that the transition to Nav Canada and its user fees had devastated the sale of business aircraft in Canada.

That was news to me, and I told him so. This claim is obviously something that can be checked, and I promised to look into it. Because of the holidays, I didn't get around to it until last week, and here is what I found. First, I contacted the head of the Canadian Business Aviation Association, Rich Gage. He tells me that he can see "NO link between the advent of Nav Canada and business aircraft sales/activities" (his emphasis). In fact, he says Canada is experiencing double-digit growth in business aviation. One source had suggested that the low market penetration of fractional ownership in Canada might be what was giving the appearance of less bizjet activity there. Gage agreed that the fractional concept has been slow to take off in Canada, but attributed this to regulatory factors and business conservatism, not the way ATC is provided or paid for.

To further check this point I talked with the senior VP of one of the leading U.S. fractional companies. He thinks the slow growth of fractionals in Canada is due to "cabotage" restrictions (Canadian residents can't be picked up in Canada by a U.S.-registered plane and flown within Canada—and vice-versa) and the much smaller number of business destinations in Canada.

So I just have this to say to my friends at XYZW: Telling tall tales is a poor way to make your point about the pros and cons of user fees and ATC restructuring. The truth will out, and your credibility will suffer, when you put out misinformation. Let's have a real debate on the merits of the issue.


News Notes

ANSPs Collaborate in Europe. With plans on the table for an eventual Single European Sky streamlining the provision of ATC services across Europe, a number of the continent's commercialized air navigation service providers (ANSPs) have begun collaborating on joint modernization projects. Last summer the U.K.'s NATS and Spain's Aena announced a joint effort to invest 150 million Euros to upgrade Spain's SACTA software. The new software will be installed in NATS's two new, consolidated ATC centers at Swanwick and Prestwick, as well as in Spain. And the two companies are in discussions with the soon-to-be-privatized German ANSP, Deutsche Flugsicherung (DFS), about jointly developing a flight data processing system for all three countries.

Airservices Australia Begins Airline Contract. Continuing its entrepreneurial search for new business opportunities, Airservices Australia in December signed a contract with Hong Kong-based Cathay Pacific Airways to develop a communications protocol and a flight crew "operational awareness program." Cathay terms this a collaborative effort between airline and ANSP to optimize airways system capacity.

NATS to Run Gibraltar ATC. Like Airservices Australia, the U.K.'s NATS has begun seeking overseas contracts to provide ATC services. Last August it signed its first one, a three-year, $6.3 million contract to supply such services for the Royal Air Force at Gibraltar Airport. The current staff at the airport will be offered jobs with NATS when the company takes over early this year.

Nav Canada Replenishes Rate Stabilization Fund. The Canadian ANSP, in announcing quarterly financial results in mid-January, noted that it had added $11 million to its Rate Stabilization Fund during the quarter, bringing its balance to $49 million. This fund is intended to be used to help cover operating costs during economic downturns, so as to minimize the need to increase rates to aviation customers during such periods.


Speaking Engagement

On Thursday, Feb. 2, I will be speaking on a panel dealing with ATC Reform at the annual American Bar Association Air & Space Law conference. It's at the Willard Hotel in Washington, DC. More information is available from www.abanet.org.


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





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