Air Traffic Control Reform Newsletter #55

Topics include: separating safety regulation from ATC operations; re-regulation the wrong approach to airline crisis; ADS-B: from Capstone to what?; controllers and NextGen; affluent suburbanites vs. airspace redesign; and other news.

In this issue:


Next Administration: Liberate the ATO from FAA

For more than two decades I have argued that air traffic control is a high-tech, 24/7 service business trapped inside a federal bureaucracy. Over the past 20 years more than 40 countries have reached similar conclusions, separating their air navigation service providers (ANSPs) from their transport agencies, making the ANSP self-supporting from direct charges paid by aircraft operators, and in the process making a clear legal and organizational separation between air safety regulation (inherently governmental) and ATC service provision (a 24/7 business). But this sensible reform has gotten practically nowhere in the United States.

Next year we will have a new President and a new Congress, the latter very likely with larger Democratic majorities than the current Congress. The new President will select a new Secretary of Transportation and a new FAA Administrator. That will provide a new opportunity to rethink and reshape transportation policy. Such opportunities were the reason former Clinton Treasury Secretary Robert Rubin conceived the Hamilton Project at the Brookings Institution. And last month that project unveiled a set of policy papers dealing with infrastructure issues. I urge you to read one of them: "Air Support: Creating a Safer and More Reliable Air Traffic Control System," by Dorothy Robyn. (www.brookings.edu/papers/2008/07_air_traffic_robyn.aspx)

Robyn, who dealt with transportation infrastructure issues in the Clinton White House, makes an eloquent case for what I've summarized in my first paragraph, above. Given the fundamental mismatch between what an ANSP must be and do, and the constraints of being embedded in a tax-funded bureaucracy, she calls for Congress to move the Air Traffic Organization (ATO) out of FAA, making it a separate administration within DOT. The new "AirNav" would have a Senate-confirmed administrator and a user-dominated advisory board dealing with capital investment, cost control, and financing issues. In addition, she argues, Congress should replace current aviation excise taxes on passengers, cargo, and jet fuel with cost-based charges on operators of all turbine-powered aircraft.

In making the case for the latter reform, she argues that charges based on long-run marginal costs would provide strong incentives for efficiency, of three types. First, such pricing would correct the perverse incentives of the current system which, by charging per passenger instead of per flight, encourages airlines to fly a given number of passengers in a larger number of smaller planes, thereby congesting the system. Second, tax funding creates the wrong incentives for the FAA, since it does not encourage it to offer "location-specific improvements in service quality, quantity, or reliability," for a price. And third, under cash-based tax funding of modernization, "current users pay for capital investments that will benefit future users," rather than having users pay for these improvements over time, as would be the case with revenue-bond financing.

Robyn also makes a persuasive argument that timely and successful implementation of NextGen depends critically on both of these reforms (organizational and funding). Here she draws in part on the excellent analysis by aviation safety expert Clint Oster of the need for arms-length safety regulation of the trade-offs involved in using NextGen to reduce aircraft spacing. And she cites chapter and verse the ICAO principles calling for the organizational separation of air safety regulation from ATC service provision.

Given the importance of these reforms to the future of U.S. aviation, Robyn says the incoming president "would want to choose as a secretary of transportation someone who would make the successful formation and operation of AirNav a top priority," and that "Willingness to help bring about the separation of the ATO should be a condition for the appointment" of the new FAA Administrator. I heartily agree.

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Why Bob Crandall Is Wrong on Re-Regulation

These are difficult times for airlines, with fuel costs having doubled over the past year, to become the largest component of operating costs. So I'm not surprised to hear some people pine for the security of government price-setting and route allocation that we had when I was in college, under the all-encompassing remit of the Civil Aeronautics Board. People too young to remember those days probably don't appreciate how few choices of airline there were then, or how high the fares (in real terms) were. The revolution wrought by Alfred Kahn in deregulating airline service truly produced the democratization of air travel in America.

But operating under open entry and with no price controls required different business models-and not everyone figured out ones that were sustainable. The airline I grew up with, Eastern, was one of the casualties, along with Braniff, National, Pan American, and TWA. Under deregulation, Southwest was able to take its highly successful intra-state model nationwide, inspiring a host of other low-cost carriers-many of which did not develop viable business models, either. But Southwest did, along with newcomers AirTran and JetBlue, and more recently Allegiant.

So when airline legend Bob Crandall called airlines public utilities that need price regulation, in his much-noted Wings Club speech in June, I was surprised but not shocked. Crandall, despite having come up with innovations such as yield management and frequent flyer programs, is still the product of a legacy airline corporate culture. So his inclination is to call for top-down solutions when his former company, and its legacy-airline cousins, are having trouble making their business models work.

So I was delighted to read the answering speech given by Michael E. Levine, one of the architects of deregulation, at the International Aviation Club in Washington, DC on July 29th. Levine acknowledged that dramatically higher oil prices have changed the ball game for airlines, and that "if oil prices stay up, the system is likely to look very different than before, simply because there won't be enough business to sustain the old system." But he went on from there to question looking to government for a remedy-the same "government that has been unable for 25 years to modernize the ATC system."

Instead of some kind of central plan or industrial policy, "to adapt to these [new] realities, the industry will need just the kind of innovation and flexibility that regulation is designed to impede. . . . Certainly, no government effort to find and implement a planned answer can be conducted free of intense interest-group politics and crippling complexity. . . . What is essential is that we generate multiple competing predictions, along with the freedom for firms to innovate using them, and see which innovations flourish and which ones die. Only a deregulated market can do that."

So Levine's number one recommendation was that government should do no harm. And his second one was that "the FAA should build an ATC system that reduces costs by using airspace efficiently, reducing or eliminating holds and circuity. It should also promote its efficient use by letting users face the costs of serving them and letting them decide how much they value it." He made several other useful suggestions, such as reforming bankruptcy laws so as to purge failed managements more rapidly.

Neither Levine nor I nor anyone else knows which business models would be most viable under permanently high oil prices. But I doubt if something like today's legacy carriers' model will be among the survivors. When pundits complain that "the airlines" are bleeding money, we should call them on it. Despite today's oil prices, Southwest and (would you believe) Allegiant are still solidly in the black. And except for fuel costs, AirTran's cost per passenger mile is still about half that of the legacy carriers. As of September, low-cost carriers will make up 27.5% of the domestic airline market, up from 24.9% at this time last year. That doesn't mean all LCCs have sustainable business models, but from my perspective, that segment looks more likely to produce survivors than the legacy sector.

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Why Is ADS-B So Far Off-Track?

On July 16, 1999 (that's more than nine years ago), the New York Times carried Matt Wald's detailed article about UPS cargo jets making night landings at Wilmington, Ohio using ADS-B/In, with a cockpit display showing other air traffic. That same year, the FAA began its historic Capstone program in Alaska, under which hundreds of mostly general aviation planes were equipped with the equivalent of ADS-B/In with a cockpit display of weather and air traffic. With enthusiastic GA support, Capstone is now being expanded to 4,000 Alaska planes. Overseas, IATA loves ADS-B, CANSO loves ADS-B, and aggressive ADS-B programs are under way in Canada, Australia, and Southeast Asia/Pacific.

So how come the FAA dropped the ball earlier this year, by proposing a far-off deadline of 2020 for equipping planes with just ADS-B/Out, leaving the real benefits (ADS-B/In) for those who must pay for this equipage to some vague future date? And even though the whole network of ADS-B ground stations will be completed by ITT by 2013? I've been puzzling over this for several months now, interviewing experts and reading extensively. For the United States (the lower 48), this turns out to be a massive coordination problem, and it's one that our politicized FAA is not in a good position to resolve.

First, recall that the business case for ADS-B rests on being able to retire a large fraction of the FAA's huge network of ground-based radars, which are costly to maintain and would be very costly to replace as they wear out. But you can't shut down those radars until everybody in the relevant airspace is equipped with at least ADS-B/Out, so that the ATC system (at least) can see where they are. Because aircraft owners balk at being forced to buy and install new gear until they get real benefits from it (and this is especially true of GA owners), FAA felt under strong political pressure to make the deadline as far off as possible (hence, 2020). And since they know that adding a cockpit display unit (to enable ADS-B/In) will be even more costly, they declined even to speculate on what that deadline will be. So to the user community, the package spelled all costs but no benefits, leading to a flood of negative co mments in response to FAA's notice.

The places where there is a near-term business case are of two kinds. Mostly they are in places where there is no radar coverage-most of Alaska, the Gulf of Mexico, northern Canada, over the North Atlantic, in the South Pacific, and over much of Australia. In those locations, ADS-B offers much better real-time information for ATC as to where planes are, which means today's huge spacing requirements can be reduced. That produces user benefits, such as more direct routings and optimal altitudes for reduced fuel burn, even if only ADS-B/Out gets implemented initially.

The other case is cargo hubs (such as Louisville and Memphis), where at night nearly all the planes are cargo planes. With fleetwide equipage (ADS-B/In), those cargo carriers can increase landing rates enough to justify the equipage costs.

In Alaska, the main benefit is greater safety, but for that the cockpit display is an integral component. For the initial phase involving several hundred airplanes, the FAA paid for the ADS-B boxes, and all involved learned a great deal from the pilot program. For the planned major expansion to 4,000 planes, FAA is trying to get the state to kick in to pay the large majority of the equipage cost. The onboard equipment, in volume production, is estimated at $12-18K per plane, of which the owner/operator would be paying about $2,500. Whether the state funding would be a grant or a loan is still being debated. FAA will be paying for the bulk of the ground stations statewide, as it is doing in the lower 48.

The hugely negative response to the FAA's ADS-B/In equipage proposal has resulted in the problem being thrown back to the Aviation Rulemaking Committee, a group of aviation stakeholders charged with advising FAA on this issue. Whatever they come up with this fall will likely influence a revised FAA notice of proposed rulemaking (NPRM), which will probably be released early next year. And we can be sure that if some category of user doesn't like the result, they will complain to Congress, which will try to micromanage the result via control of the budget process.

Imagine, instead, that a balanced group of aviation stakeholders, instead of just being an advisory body, constituted the board of directors of a self-supporting ATO (or AirNav). It would be in the interest of all those board members to resolve this coordination problem, so as to achieve the cost savings from retiring numerous radars before they need to be replaced and to gain the improved safety and capacity resulting from cockpit displays of weather and traffic. They would therefore have powerful incentives to work out some kind of a deal to bring about rapid implementation of not only ADS-B/Out but also ADS-B/In. This might well involve the ATO helping some GA users pay the costs of equipage. But very large volumes of ADS-B boxes and displays would also mean large economies of scale in production, driving down unit costs, and making the whole endeavor less costly.

It will be interesting to see whether any of the commercialized ANSPs, such as Nav Canada or Airservices Australia, comes up with such a win-win approach to rapid implementation of ADS-B.

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Controllers and NextGen-Where's the Attention?

Over the last several years, I have learned a lot and written a lot about the paradigm shift represented by NextGen. The concept of operations seems to be pretty well worked out, based on concepts such as 4D trajectories, system-wide information management, required navigation performance, and network-enabled operations. Key building blocks such as ADS-B are on the way, albeit far too slowly. But one key element in this brave new world-the changed role of the controller-seems to be getting far too little attention.

That's why I was pleased to see Gary Church's article, "NextGen: New Role for Air Traffic Controllers," in the Summer 2008 edition of The Journal of Air Traffic Control. He explains why the current manual method of separating planes is no longer scalable-"We can no longer continue to divide the airspace up into smaller and smaller pieces, sit down one or two controllers, and solve workload by making the patchwork of airspace more complex." In such ever-smaller sectors, "the time to coordinate acceptance and handoff of aircraft out of the sector exceeds the work necessary to actually separate aircraft."

Church goes on to explain the shift from direct manual control of aircraft to managing the separation of aircraft, assisted by automation tools. Instead of instructing a trailing aircraft to slow down to avoid overtaking a leading aircraft, "the controller can delegate a minimum spacing distance to maintain between two cooperatively equipped aircraft (ADS-B/In with cockpit display of traffic information) for a designated route length or time." Another example Church gives is a controller using decision-support tools to manage traffic flows, so that planes capable of flying high and fast, with high descent rates are kept separated from less capable aircraft until very near the destination airport. As he explains, the automation tools "play the role of optimization and giving the controller choices, but once chosen, the automation maintains the necessary sequencing and separation."

That sounds great, but how many controllers are involved in NextGen planning as of now? And has any of the curriculum for training the huge numbers of newbie controllers being hired and trained over the next decade been changed to prepare them for this change of roles?

These changes need to happen, because the system cannot be scaled upward with the 20th century paradigm of ever-more sectors, completely manual control, voice-only communications, etc. But this kind of change will go a lot more smoothly if controllers are an integral part of the planning and implementation.

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Affluent Suburbia vs. New York Airspace Redesign

The most congested airspace in America is that above the mega-metro area of New York City, adjacent New Jersey, and southeastern Connecticut. The FAA has worked for years to redesign this hugely complex airspace, where changing winds and weather make approach and departure paths for the various airports conflict with one another. The redesign can make a significant difference that will ease congestion at JFK, LGA, EWR and the other airports in the region, saving about 200,000 hours of delay per year, when fully implemented. But those benefits will only be realized if the FAA is allowed to implement the redesign.

Residents of affluent suburbs in New Jersey, Westchester County, NY, and especially Fairfield County, CT are up in arms about the idea that their idyllic communities will all of a sudden be able to see planes flying overhead (more than a mile high) and might even be able to hear them! Last November a 13-town alliance (including Darien, Greenwich, New Canaan, and Stamford) sued the FAA in the US Court of Appeals for the 2nd Circuit, alleging that the noise from the new flight paths will be harmful. "This is not the kind of town that will take this," USA Today recently quoted an activist in New Canaan.

Excuse me, but I once lived in New Canaan (which is 34 miles, as the crow flies, from LaGuardia, not exactly on final approach paths). No, I was not wealthy, but in my first job out of MIT (at Sikorsky Aircraft), my wife and I rented a small apartment behind the house of a long-time resident. New Canaan is so upscale that merely by having an address in town, we qualified for a credit account at the local hardware store! The very idea that New Canaan's elite "way of life" will be harmed by the mere sight of planes on high-altitude overflights ought to be laughed out of court.

To be sure, to the extent that the airspace redesign means changed final approach and departure paths that expose neighborhoods near the airports 65 dB noise, there is a good case for compensation. But surely there is also a case for the larger interests of air travelers nationwide not to be held hostage to the overly sensitive esthetic concerns of those who can afford to live in America's toniest suburbs.

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News Notes

Reason's 2008 Update on Commercialization and Privatization. Every year for the past 20 years the Reason Foundation has published its annual privatization report, covering public-private partnerships in a large variety of fields. The 2008 edition has just been released, and I wrote the chapter on airports and air traffic control. Go to www.reason.org/apr2008/air_transportation.pdf.

Commercialized ANSPs Win More Awards. The Air Traffic Control Association's 2008 Glen Gilbert Memorial Award (named after America's first air traffic controller) is being given this year to John Crichton, the President and CEO of Nav Canada, the nonprofit, stakeholder-governed ANSP for Canada. Airways New Zealand (the first ANSP to be commercialized) has won an award from Computerworld magazine for its Collaborative Arrivals Manager, a time-management tool that is saving airlines time and money. And the FAA has given its Willie F. Card award to Serco, for outstanding management of the contract tower at Phoenix Goodyear Airport.

Two More Commercialized ANSPs. Finavia from Finland and Hellenic Civil Aviation Authority are the two newest air navigation service providers to have joined CANSO, the Civil Air Navigation Services Organization, made up of such entities. With the addition of these two, "to all intents and purposes, CANSO members now represent the whole of European airspace."

ICAO Conference on NextGen and SESAR. The International Civil Aviation Organization will present a major ATC event in Montreal, September 8-10, at ICAO headquarters. Its theme is "Integration and Harmonization of NextGen and SESAR into the Global ATM Framework." Among the keynote speakers are FAA Acting Administrator Bobby Sturgell and Eurocontrol Director General David McMillan. Details at: www.icao.int/inexses.

FAA Replacing ETMS. For many years the FAA/ATO has carried out its flow control management using a system called Enhanced Traffic Management System (ETMS). Data from that system has been essential to all sorts of analyses, including the landmark January 2007 ATC cost allocation study. But ETMS has reached its maximum processing capacity and isn't flexible enough for automated interaction with other emerging systems. So a new system went on-line in June called Traffic Flow Management-Modernization (TFM-M), developed by Computer Sciences Corp. The two will operate in parallel until August 2009, when ETMS will be shut down and TFM-M will fully replace it.

Fedex Implementing Enhanced Vision. The FAA has certified, and Federal Express has begun implementing, a new heads-up display (HUD) that will include an Enhanced Vision System (EVS), displaying images from a forward-looking infrared (FLIR) system. The imagery will allow the pilot to see the airfield and/or surrounding terrain at night, in rain, in snow, or light fog. The first use of such a system was on Gulfstream business jets, beginning in 2001. But although several airlines have been installing HUDs (Alaska, Delta, Southwest), Fedex is the only one thus far to add EVS. Fedex plans to equip all 362 of its planes by 2015, and it is starting with its MD-lls.

New Publication on Wake Turbulence. The National Research Council has released a book titled Wake Turbulence: An Obstacle to Increased Air Traffic Capacity. It is the work product of the Committee to Conduct an Independent Assessment of the Nation's Wake Turbulence Research and Development Program. You can download a free executive summary from: www.nap.edu/catalog/12044.html.

Correction from Last Issue. Last issue I noted the launch of CANSO's new online magazine, Airspace. Unfortunately, I erred when I said it was available on the CANSO website. Instead, you can sign up to receive it by email at www.airspacejournal.com.

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Quotable Quotes

"[T]he FAA's dual mission as both operator and regulator of the air traffic control system represents a potential conflict of interest. In every other area of aviation (e.g., the manufacture of aircraft and the operation of aircraft and airlines), the FAA has no operational role, acting instead as an independent regulator. Independent regulation is no less desirable in the case of air traffic control, where the fundamental issue of how much space to maintain between planes involves a trade-off between safety and airspace capacity. . . . Although safety experts have long called for this change, it is becoming even more critical as the air traffic control system shifts to satellite-based technology, which enables closer spacing of aircraft."
--Dorothy Robyn, in "Air Support: Creating a Safer and More Reliable Air Traffic Control System," Brookings Institution, July 2008.

"FAA has two goals in operating the air traffic control system, and these goals can often pull in different directions. One goal is to operate the air traffic control system safely. The other is to provide enough capacity to avoid excessive and persistent delays. Some of the potential ways of improving safety can reduce capacity and increase delays, and some potential ways of increasing capacity can reduce safety. Currently, FAA, as both regulator and operator of the air traffic control system, makes the capacity versus safety trade-offs internally."
--Clinton V. Oster and John S. Strong, Managing the Skies: Public Policy, Organization, and Financing of Air Traffic Control Management, Aldershot, UK: Ashgate Publishing, 2007, pp. 152-53.

"Picking winners and shaping industries (sometimes known as 'industrial policy') hasn't worked here in the past. It hasn't worked in Europe, it hasn't worked in India or China or Japan, and there is no reason to believe it will work here this time. In fact, dynamic growth has occurred in just those countries and industries that have moved or stayed away from industrial policy. The problems with it are obvious. First, the policy always somehow protects the interests of everyone already in the game. The decisions made are hostage to political pressures and interest groups of all sorts. Second, by the time you get everyone to agree on what should be done, the circumstances have changed again so that the policy is outmoded. Finally, it's bad enough that the outcome is often inefficient; but even worse is the irresistible pressure to validate the decision by suppressing alternatives that might compete with the plan o r prove it wrong."
--Michael E. Levine, "Airline Survival in a Tough World," The International Aviation Club, Washington, DC, July 29, 2008.

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





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