Airport Policy and Security Newsletter #28

Topics include: fixing New York's airport delays; progress on passenger checkpoints; what went wrong at BAA?; screening cargo on airliners; terrorist dry runs; and other news.

In this issue:


New York Airport Congestion—Markets or Mandates?

This year's record airline delays have been felt most acutely at New York's three major airports. Newark, LaGuardia, and Kennedy ranked as the top three most-delayed U.S. airports for the first half of 2007. The FAA is working on "demand-management" rules for LGA that will likely set a precedent for other airports with chronic delay problems. So we all have a stake in what approach gets adopted.

As I've written before, it all boils down to using either markets or mandates to resolve a situation in which demand for landings and takeoffs at an airport greatly exceeds the available capacity. The summer debates have been filled with angry rhetoric. Some put the blame on "over-scheduling" by the airlines, and especially on the large proliferation of regional jet (RJ) operations at the New York airports (as elsewhere). Airlines retort that they are simply responding to customer demand for greater frequency—eight RJ flights a day between LGA and Atlanta, say, instead of two 757s. But in a classic tragedy of the commons situation, when every airline makes that choice, you have far more flights scheduled in a given hour than can possibly be handled, given current runways and ATC procedures. Hence, chronic delays for everyone.

For LGA, the FAA's proposed demand-management rules would limit hourly operations, on weekdays from 6 AM to 10 PM, to 81 (75 scheduled plus 6 unscheduled). This is the level FAA deems safe, given current runways and ATC technology. To make that stick, the agency will have to come up with some way of allocating those hourly slots to some subset of the flights now attempting to operate. One market approach is to auction the slots—and given the dynamics of the airline business, those auctions should be for a limited period of time, at which point new auctions would be held on a regular basis. This process would sort out the most economically valuable set of flights, letting the market make the trade-offs between aircraft size and frequency. Different airlines might well make different decisions. Proceeds from the auction should go into a fund used solely to pay for airport capacity expansions.

A less-complicated way of getting to the same result would be for the FAA to authorize each such airport to replace its current weight-based landing fee with a flat rate for each landing and take-off during busy hours, regardless of the size or weight of the plane. Runways today are designed to handle the heaviest airliners in any case, so there is no good reason to use weight as the basic parameter of runway access charging. Because nobody knows in advance what the "right" price will be to yield the desired 81 operations per hour at LGA, this market-clearing price would have to be arrived at by trial and error—and the FAA would need to allow this kind of flexibility. I suggest starting out with the current charge for a 757. Apply that to all LGA operations—private jets, RJs, MD-80s, A320s, etc.—and see what schedule changes have been made after a month. If there are more than 81 flights per hour, increase the price the next month, and so on until aircraft operators have made enough trade-offs to get the number down to 81. Within six months or so, the price should converge to a market-clearing level. From then on, only modest tweaks would likely be required to keep it there.

But that's not the end of the story. There are lots of things that can be done to increase the capacity of New York's airports over the next decade or two, thanks to the technologies coming along in the revamping of air traffic control called NextGen. The FAA's impending airspace redesign (if not shot down by NIMBYism) is an important first step. It will be helped along by much wider equipage of aircraft for area navigation (RNAV) and required navigation performance (RNP) arrivals and departures; much greater precision in flight paths (thanks to RNAV and RNP) will make it possible to reduce the separation between planes, adding to airport capacity. More precise control of planes on the ground, via ASDE-X, will also speed up operations. Revenues from slot auctions or market-based landing fees could help expedite these improvements.

Any alternative to market allocation will be either random (lotteries) or arbitrary (administrative allocation). Neither would lead to the highest and best use of the scarce resource of being able to land and take off, on time, from New York's airports. The U.S. DOT's Congestion Initiative is actively promoting congestion pricing to address urban (auto) traffic congestion. It should be doing likewise for airport congestion.

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Modernizing Airport Passenger Checkpoints

I'm glad to see the Transportation Security Administration responding to concerns that I and others have raised about the many security deficiencies of passenger checkpoints. Quite a few new security technologies are being tested at airports this summer, as TSA seeks to reduce the burdens on air travelers while increasing the effectiveness of screening passengers and their carry-ons. We are still a long way from the ideal checkpoint—in which you'd walk through a single detector that could quickly detect any prohibited objects, without your having to remove any clothing, and in which your bag went through a fast scanner that would check your laptop and liquids for explosives without them having to be removed. But bits and pieces of such a system have been developed, and some are in operational field tests at selected airports.

First, for screening carry-ons, a new generation of advanced multi-view X-ray machines is being tested at Kennedy, Los Angeles, Las Vegas, and Washington Reagan airports. Competing versions from L3, Smiths, and Rapiscan use techniques like X-rays at two different energy levels to provide multiple views of objects within the bag. Longer-term, the goal of TSA's Project Cambria is continuous explosive detection checkpoint processing, at up to 440 bags per hour—nearly four times the rate of current EDS machines used for checked bags.

What about liquids? So far, the only device TSA is testing at airports is the PaxPoint scanner, which will be used to check for liquid explosives in containers that are exempt from the 3-ounce rule—such as baby formula, breast milk, and medicines. Some 200 of the machines are being tested at Boston, Denver, Detroit, Las Vegas, Los Angeles, Miami, and Newark. TSA is still testing 3-D X-ray machines that could detect explosives inside carry-on bags, making the current Ziploc routine unnecessary. TSA Administrator Kip Hawley recently told the Washington Post that such technology might start appearing in airports after Labor Day 2008.

The longstanding security loophole under which most passengers are not checked for non-metallic items under their clothes (e.g., ceramic knives, plastic explosives) is being addressed as TSA is testing both backscatter X-ray and millimeter wave technology at Los Angeles, Phoenix, and Kennedy, using backscatter machines from Rapiscan and American Science & Engineering, and millimeter wave machines from L-3 Communications. The latter has also been in testing at Amsterdam Schiphol airport since last spring, with good customer acceptance.

The TSA is also testing a small device called CastScope. It uses a form of backscatter X-ray to examine casts, braces, heavy bandages, and prostheses. CastScope is being tested at Nashville, San Jose, Tampa, and Reagan Washington airports. And TSA has also taken a step toward addressing the phony ID problem. It has hired and trained security officers to check IDs at passenger checkpoints at more than 250 airports, equipping them with loupes and black lights to examine suspect photo ID cards.

One unfortunate setback is that TSA still has not approved the promising GE ShoeScanner that has been installed at eight airports where the "Clear" registered traveler program is in operation. It's in use for the program's initial site at Orlando, but TSA is not satisfied with its accuracy, and uses labor-intensive (but unspecified) back-up procedures for those whose shoes are scanned. GE last month delivered an upgraded version to TSA's testing lab in New Jersey, so keep your fingers crossed that it will pass muster.

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Whither BAA?

"Heathrow Hell," headlines The Economist. "A nightmare—the unacceptable face of monopoly capitalism," writes the Financial Times. London Mayor Ken Livingstone says the airport is "shaming London."

These are painful things for me to report, since I generally favor airport privatization as a sound policy. And the privatization of British Airports Authority by Margaret Thatcher's government in 1987 was the world's first large-scale airport privatization. In a 1990 Reason Foundation policy study, I used early data from BAA's operations to document increased capital investment, increased labor productivity, a welcome expansion of brand-name and street-priced retail, and careful attention to customer satisfaction.

Yet clearly, conditions at Heathrow (and also at BAA's Gatwick and Stansted, the other two major airports serving London) have deteriorated since then. Those three airports are the three worst in Britain in passenger delays (at security lines and at immigration). Heathrow is handling (barely) 70 million passengers a year, in facilities built for 45 million—prior to next spring's opening of Terminal 5, which will accommodate 30 million of them. Heathrow has been accused of failing to add more security checkpoints because it didn't want to demolish lucrative shops to make room for them.

Martin Wolf, in the Financial Times (August 24, 2007) acknowledged all the problems, but pointed out that many of the reasons things have come to this pass are beyond BAA's control. The Department of Transport sets the carry-on bag restrictions, while the Home Office manages the immigration procedures. The addition of new runways and terminals is hugely constrained by the U.K.'s very lengthy planning process. Plus, the investment needed to pay for costly expansions must ultimately be derived from charges to airlines and their passengers. Yet the airports regulator, the Civil Aviation Authority, has proposed cutting BAA's approved rate of return from the current 7.8% to 6.2%. This is at a time when other investor-owned infrastructure in developed countries gets returns in the low double digits.

The problem stems from a basic flaw in the original privatization. For various reasons, the Thatcher government decided to privatize BAA as a single entity, rather than selling the London airports individually. Three British think tank studies had all argued against this approach, noting that competition among three major airports would reduce or eliminate the need for regulation. But government planners were enamored of their Traffic Distribution Rules, which allowed them to centrally plan air service (and capacity) among the three airports, and use profits from one to subsidize the growth of another. By thus creating a monopoly, they precluded the kind of healthy competition that—at the margin—could have kept the airports' management on their toes and prevented the service deterioration we see today.

Several months ago the U.K. Competition Commission announced a year-long study of whether BAA's monopoly inhibits competition and whether BAA should be broken up. The Economist has defended the idea of divestiture against the claim that there would be few gains, since Heathrow and Gatwick are already at capacity. "Genuine rivals are remarkably adept at finding capacity where none was thought to exist, and at meeting demand in new ways." And it even suggests that competition might make price regulation obsolete: "The CAA is already thinking of getting rid of caps on landing fees at Stansted, and an independent Gatwick could easily be deregulated as well. Huge Heathrow, with its proximity to London and vast range of connections, is a tougher candidate, but if it charged too much, traffic would begin to move." I'll add that most experts believe Heathrow's current landing charges are much too low; the removal of price controls would give airlines incentives to shift flights among airports and would provide the revenues needed for BAA to build a third runway and sixth terminal at Heathrow.

Privatized German airport company Fraport said last month that it would consider bidding for BAA assets if divestiture comes about. Thus, even though BAA's new owner Ferrovial would prefer to keep its London monopoly, it seems clear that there would be lively bidding for any airports put up for sale.

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For Better or Worse, Here Comes Belly Cargo Screening

Ever since 9/11, Rep. Ed Markey (D, MA) has been calling for 100% physical screening for explosives of all cargo carried on passenger planes. Congress mandated such screening for checked luggage, but not for either carry-on bags or belly cargo, so in that sense Markey was right to call belly cargo a glaring loophole (though he's been curiously quiet about carry-ons). At any rate, in July, he finally got his way when Congress passed a new Homeland Security bill that included this provision.

Passenger planes carry about 6 billion tons of cargo per year—all sorts of stuff that is time-sensitive but not too heavy (electronics, auto parts, seafood). About 2 million shippers per day generate this cargo, with most of them using freight forwarders operating out of about 10,000 facilities nationwide. Currently, only a small fraction of this cargo is physically checked (by dogs, physical inspection, explosive trace detection, or EDS machine). The main line of defense is the Known Shipper program, under which forwarders and shippers must be vetted and comply with various security procedures. Cargo from a non-known shipper is far more likely to be inspected. Thus far, this risk-based approach has worked well, and TSA has publicized its revoking of approval for various shippers and forwarders who violated approved procedures.

It's going to be a huge hassle, involving a lot of new costs, for airlines and airports to comply with the new 100% inspection requirement. If Congress doesn't pay for more TSA equipment and screeners, airports will most likely have to shoulder the costs, passing them along to airlines and thence to shippers. The 10-year costs have been estimated to be in the range of $3-4 billion.

Fortunately, airports won't have to start from scratch. TSA has been running an air cargo explosives detection pilot program for belly cargo at San Francisco and Cincinnati airports since last summer. It's testing EDS machines like those used for baggage screening to see how much belly cargo can fit into the apertures on the machines, and how reliable they are at spotting explosives in the varied packages and containers that cargo is shipped in. Larger explosives-screening units exist, but have not been part of these tests. For example, American Science & Engineering makes a backscatter X-ray unit that can be driven past a loaded cargo container. GE is exploring the use of nuclear quadrapole resonance to find explosives in a standard LD3 shipping container (5.1 x 5 x 5.3 feet). Meanwhile, at least one airport—Lexington Blue Grass—began screening all belly cargo last March, mostly using its in-line EDS baggage system.

It's still not clear to me that all this additional cost and complexity is worth it. But it does remove one of the major inconsistencies in the post-9/11 security system. The remaining ones include: carry-on bags, non-metallic objects under passengers' clothes, airport access control, airport perimeter protection . . . and on and on. A beefed-up risk-based system for air cargo would have been a lot better use of limited aviation security resources.

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Looking Out for Test Runs

There was some initial criticism of the TSA in late July when the media caught wind of the agency's unclassified bulletin urging security and law enforcement people to be on the alert for "ordinary items that look like improvised explosive device components." The bulletin pointed out that a joint FBI-Homeland Security assessment found a pattern of terrorists conducting dry runs in advance of previous attacks. Thus, a carry-on bag in Milwaukee containing a wire coil, electrical switch, batteries, and two blocks of cheese (consistency similar to some explosives) was the kind of thing that could have been a dry run for an improvised explosive device.

It was good to see subsequent kudos for TSA, even from long-time critics of the agency. For example, security blogger Bruce Schneier (with whom I've tangled on a radio talk show) put it this way: I don't care if someone is carrying a water bottle, wearing a head scarf, or buying a one-way ticket, but if someone has a block of cheese with wires and a detonator, I want the FBI to be called in." Similarly, MIT professor Theodore Postol told AP that the incidents noted in TSA's bulletin are "exactly the kind of problem that has worried me incessantly." James Carafano of the Heritage Foundation added, "This is what TSA should be doing, whether it turns out to be a whole bunch of harmless coincidences or part of a plot."

It was also refreshing to see, around the same time, TSA rescind the ridiculous ban on cigarette lighters. The United States was the only country in the world to forbid carryon lighters, thanks to our ever-vigilant Congress. After much lobbying by TSA Administrator Kip Hawley, Congress gave TSA permission to drop the ban if TSA concluded it was not enhancing aviation security. I don't know why Hawley waited till July, but at least he did it.

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News Notes

Citizen Eyes and Ears Exempt from Suits. As I noted in a previous issue, the six imams who were removed from a US Airways flight last year after passengers reported suspicious behavior had filed suit against the passengers, the airline, and the police. That prompted Rep. Peter King (R, NY) to include a provision in the Homeland Security bill to confer immunity from civil suits on citizens who in good faith report suspicious behavior. After a major battle to remove this language, waged by a number of leading Democrats at the conference committee level, the measure remained in the final bill, which is now law. (And at about the same time, the six imams removed the passengers from their lawsuit.)

Good Reading on Homeland Security. I have not read either of these new publications, but know and think highly of the authors, so I have no hesitation in commending them to your attention. The first is "The Economic Impacts of a Terrorist Attack on the U.S. Commercial Aviation System," in Risk Analysis, Vol. 27, No. 3, p. 505, June 2007. The authors, all from USC, are Peter Gordon, James Moore, Ji Young Park, and Harry Richardson. The other is a new book by Col. Randall J. Larson, Our Own Worst Enemy (Grand Central Press, formerly Warner Books, September). For a brief exposure to Randy's thinking, check out his article, "DHS Report Card: The Good, the Bad and the Ugly," at www.riponsociety.org/forum407c.htm.

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Quotable Quotes

"It is vividly clear to me that terrorists will provoke another 9/11. It is not clear to me whether it will be in the aviation industry or whether it will be on some other threat vector. . . . So for the airline industry, we have to make the bar of crossing over into this zone so challenging and so uncertain and so robust that [terrorists] will take another vector."
--Michael Jackson, Deputy Director, Department of Homeland Security, at the IATA World Summit, Vancouver, June 5, 2007.

"Al–Qaeda terrorism is different yet again. The goal is to terrorize. It doesn't care about the target, but it doesn't have any pattern or tactic, either. Given that, the best way to spend our counterterrorism dollar is on intelligence, investigation, and emergency response. And to refuse to be terrorized."
--Bruce Schneier, Crypto-Gram, June 15, 2007 (www.schneier.com/crypto-gram-0706.html.)

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





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