In this issue:
- House Democrats’ dissenting views
- A closer look at FAA’s aviation forecast
- Right-wing groups up the anti-union ante
- CBO’s misleading budget score of the ATC corporation
- Further thoughts on the ATO’s assets
- News Notes
- Quotable Quotes
House Democrats’ Dissenting Views
On March 1st, House Transportation & Infrastructure Committee Ranking Member Peter DeFazio (D, OR) and Aviation Subcommittee Ranking Member Rick Larson (D, WA) sent out a Dear Colleague letter opposing the ATC corporatization provisions in the bill approved in February by the T&I Committee (HR 4441, the AIRR Act). As Senate Democrats consider whether to include such provisions in their bill, a thoughtful review of the DeFazio/Larson letter’s points is in order.
To begin with, of course, they continue to mis-label the provision as “privatization,” knowing that this term conjures up images of a for-profit company taking over the ATC system, or of outsourcing a government function to a (non-unionized) private company. Neither is the case in HR 4111, which proposes to reform the existing Air Traffic Organization simply by separating it from safety regulator FAA, allowing it to charge customers directly for its services (with exceptions for general and corporate aviation) and issue revenue bonds (as airports do), and be governed by a 13-member board nominated by all key aviation stakeholders.
Beyond that basic mis-characterization, the letter goes on to make five claims about why the change should not happen.
“The AIRR Act jeopardizes aviation safety.” The main point offered in support of this claim is that it would leave the remaining 7,400 FAA safety regulatory employees “vulnerable to Congressional budget cuts and shut-downs.” Today the entire 46,500-person FAA workforce is vulnerable in this manner, so rescuing the Air Traffic Organization would be a large step in the right direction. Moreover, were there any serious likelihood of corporatization jeopardizing air safety, controllers’ union NATCA would not be supporting it. In fact, separating the regulator and the operator increases visibility about which organization makes which decision, improves accountability, and increases the level of safety.
“It also severs ties between the Department of Defense and the ATC system.” This assertion is made up out of whole cloth. The bill changes nothing about this important relationship, except for exempting military flights from paying the fees that airlines will pay for using the ATC corporation’s services. And for context, civil-military collaboration is alive and well with corporatized air navigation service providers overseas. Airservices Australia and the Australian military are jointly procuring a new en-route ATC system under a program called OneSky, and BelgoControl is in discussions with the Belgian Armed Services about a full merger of civil/military ATC. The new structure here would further facilitate cooperation between civil and military ATC providers to help the military modernize its aging ATC infrastructure.
The ATC corporation “would be too big and too critical to fail; the American public would be required to bail out the corporation if it were to default.” This subject came up during the February hearing at which I testified. I explained that we learned from the severe decline in air travel post-9/11 that ATC corporations need a reserve fund to tide them over serious traffic and revenue declines. Nav Canada had one, and did not need a bail-out. But newly created NATS in the UK did not have a reserve fund, and ended up getting a public infusion of capital (as did numerous U.S. airlines). In a back-and-forth with DeFazio, I noted that Nav Canada instituted a temporary rate increase (much smaller than if it had not had a reserve fund), which DeFazio seized on, and he repeats in the Dear Colleague letter my statement that it would be customers, not taxpayers, who might have to pay more, depending on the size of the reserve fund. But those customers would be airlines, not “the American public.”
“The AIRR Act gives the corporation an unprecedented power to tax American consumers to pay for the ATC system.” This is doubly incorrect. First, the shift from current aviation excise taxes to ATC user fees would shift the locus of payment from passenger ticket taxes to charges paid by the airlines. ATC fees would be another operating cost-like payroll, fuel, airport landing fees, etc. There would be no “charge” to passengers. Secondly, as I also pointed out during the hearing, there is a fundamental difference between a charge for a service one uses (e.g., electric bills sent out by government utility Tennessee Valley Authority) and a tax. There is an extensive, detailed legal history that clearly distinguishes between user charges and taxes.
The ATC corporation “could disregard the effects of aircraft noise and pollution.” On this question I checked with former FAA Chief Counsel (and also former COO of the Air Traffic Organization) David Grizzle. He verified what I thought was the case: that changes in ATC procedures (such as new RNP arrival routes that change which properties are impacted by noise) are subject to the approval of the safety regulator (FAA), also subject to the National Environmental Policy Act, and are not decided unilaterally by the ATC corporation. So people concerned about noise and pollution would have the same recourse they have today: complain to the FAA.
Frankly, I have a hard time accepting that smart and aviation-knowledgeable people like Reps. DeFazio and Larson actually believe the things they wrote in this Dear Colleague letter. I hope their colleagues in the Senate will take a more open-minded and fact-based look at these important questions.
A Closer Look at the FAA’s Latest Aviation Forecast
The headline version of the projections in FAA’s FY 2016 Aerospace Forecast focused on airline passenger miles, which grew a bit faster last year and led to the agency slightly increasing its forecast of airline revenue passenger miles (RPMs) for the next 20 years (annual growth of 2.6% vs. 2.5% in last year’s forecast). But less-noticed are some disturbing trends for air traffic control deep in the data charts of the Forecast.
Long-time readers of this newsletter may remember that for years I have charged the agency with presenting rosy scenarios in these annual documents. Ever since the peak (pre-9/11) year of 2000, aviation growth has been mediocre-but the forecast always projects a strong upward trend going forward. Last month the Government Accountability Office formally noted this problem, finding that these FAA annual forecasts “have consistently overestimated aviation activity since 2004” and “have been less accurate the further out they forecast.” (GAO-16-210, March 2016). In particular, the mean percentage error in total aircraft operations was 25.5% in FAA’s five-year forecasts and 54.7% in its 10-year forecasts (always in the same direction).
I’m sure FAA knew this report was coming, and in its data tables projecting ATC activity, the annual growth rate projections have been trimmed somewhat, as follows:
|Tower activity growth rate||1%||0.9%|
|TRACON growth rate||1.2%||1.1%|
|Center growth rate||1.7%||1.4%|
But in comparing the last several years’ Forecast reports, I noticed another problem. Through 2014, the data charts used 2000 as the baseline for historical comparisons, but the 2015 and 2016 reports now use 2001. That makes a huge difference: 2000 saw the highest rates of U.S. flight activity ever recorded, whereas 2001’s numbers were in the tank, due to the aftermath of 9/11. Neither one is a “typical” year to use as a baseline, but 2001’s numbers were so low that anything higher looks like an up-trend.
Hence, to provide some perspective on needed future ATC capacity, the numbers below compare FAA’s new forecast figures for 2036 with the older historical baseline of 2000.
|Projected vs. Historical ATC Activity Levels in FAA Annual Forecasts|
|Airlines||Air Taxi/Commuter||General Aviation||Military||Total|
|% change Towers||+56%||-41%||-31%||-14%||-13%|
|% change TRACONs||+46%||-47%||-31%||-34%||-11%|
|% change Centers||+59%||-21%||-8%||-57%||+21%|
We can see that compared with the peak year of 2000, nearly every segment of aviation is projected to have significantly less ATC activity 20 years from now. Only the airline segment is forecast to have significant growth in ATC operations over this period. In terms of ATC facility usage, towers and TRACONs are forecast-in aggregate-to have 11 to 13% less activity than in 2000. Only the en-route Centers will have more-with a whopping 59% more airline activity offsetting declines in air taxi, GA, and military operations to net out at 21% more Center transactions in 2036. These kinds of projections (assuming they are realistic) have significant implications for ATC capital investment planning, facility consolidation, and related matters that the ATO and its successor organization must be prepared to deal with.
Right-Wing Groups Up the Anti-Union Ante
Last month I wrote about misleading and incorrect arguments in two blog posts on National Review Online claiming that the House FAA bill that includes ATC corporatization is “fake privatization” and a “union giveaway.” Those charges had also been made in an anti-union screed in The Daily Caller.
But late last month the conservative research group Capital Research Center (CRC) released the March edition of its Labor Watch newsletter, devoting nine pages to an anti-corporatization diatribe called “PATCO’s Revenge.” Much of the piece recounts the history of the 1981 illegal strike by former controllers union PATCO which led to President Reagan firing those who refused to return to work. Another large chunk of the article is a long personal attack on Chairman Bill Shuster’s father (former Rep. Bud Shuster), followed by repeating previously aired information about Bill Shuster dating a lobbyist for airline trade group A4A. None of this has anything to do with the merits of ATC corporatization, and seems to be an example of the old adage that if you can’t discredit the substance of a message, try to discredit the messenger.
In the small fraction of the piece that attempts to deal with the substance of the issue, it repeats almost word-for-word the DeFazio line of argument that the bill would “create an unaccountable special-interest-controlled monopoly ‘corporation,'” and also that it “would give the controllers union the deal of a lifetime.” Its only citation for the union give-away allegation is the previously noted NRO blog posts, which have been shown to be erroneous. As drafted, the legislation bans the right to strike and does not give NATCA or other ATC unions any kind of veto power over policy or operational decisions-only the same degree of inclusion in discussions that they have in the Air Traffic Organization today.
What I find especially disturbing is the piece’s misunderstanding (or misrepresentation) of what the proposed corporation actually is. It is not a government-sponsored enterprise (GSE) like Fannie Mae, as the piece claims. It would be a federally chartered private nonprofit corporation, analogous to the American Red Cross or federal credit unions. It would receive zero government funding, and its bonds would not be backed by taxpayers, only by the revenues that it generates from providing ATC services (just like private or public toll roads-or like utility companies).
Surprisingly for a conservative organization, CRC seems enamored of congressional micromanagement of what is basically a high-tech business. It repeats the NBAA line about the stakeholder board being “special interests” and opposes shifting governance from a gaggle of politicians to a board of directors reflecting the varied interests of all key aviation stakeholders. Congressional micromanagement doomed National and Dulles Airports to mediocrity when they were part of FAA and their budgets were specified in detail by congressional committees. Only when they were divested to a newly created nonprofit entity were those airports freed from micromanagement and enabled to self-finance major improvements by issuing revenue bonds. This was done, incidentally, by the Reagan Administration. CRC’s article also misunderstands that the stakeholders would be nominated by groups like AOPA and A4A, but would not directly represent them. No board member could hold a position in or receive compensation from any aviation company or organization, and each would have a legally enforceable fiduciary duty to serve the best interests of the ATC corporation, not the entity that nominated them. This is a model that has performed superbly over the past 20 years for the corporatized nonprofit Nav Canada, which has won global awards as the world’s best air navigation service provider (ANSP).
My friend Marc Scribner of the free-market Competitive Enterprise Institute has published a brief rebuttal to the CRC piece, explaining the AIRR Act’s provisions prohibiting controllers from striking. Among other things, he notes that the bill extends to the ATC corporation the provisions of 5 USC 7120(f), which provides that in the event that the union carries out a strike, work stoppage, or slowdown, the union would be stripped of its “exclusive recognition status.” He goes on to ask, “Is [CRC’s] Allen suggesting that NATCA would risk its very existence in order to mount a highly dubious legal challenge to the law? If there is any evidence that NATCA has become suicidal, it’s a well-kept secret.” (http://cei.org/blog/no-airr-acts-air-traffic-control-reforms-do-not-grant-controllers-strike-powers)
It’s dismaying to see a respected conservative organization, founded by Willa Johnson, a former official at both Heritage Foundation and Reagan’s Office of Presidential Personnel, be so filled with anti-union animus as to fail to take into account any of the past 30 years of research on why ATC is a poor fit for a tax-funded bureaucracy and on the case for corporatization, as embraced by more than 50 countries. I write this as one whose first policy paper making this case was commissioned and published by the Heritage Foundation back in 1982.
Though these conservative attacks on the bill as a “union give-away” are factually incorrect, it might well clear the air on that issue if an amendment were added to the bill stating in simple, direct language that employees of the ATC Corporation will have no right to strike. Having no such hidden agenda, I cannot imagine that NATCA would object.
CBO’s Misleading Scoring of ATC Corporation
Supporters of converting the FAA’s Air Traffic Organization into a self-supporting ATC Corporation nervously awaited the Congressional Budget Office’s required scoring of the House T&I bill that includes this transition. Their fears were realized when CBO released its 19-page report on March 9th. The headline number was the finding that the transition would add $19.8 billion to federal budget deficits through 2026.
Though I’m hardly an expert on the arcane subject of federal budget scoring, I quickly downloaded and read the 19-page report. It was immediately obvious what the problem is. Under the budget scoring rules that CBO must follow, it has to take a very literalist approach to this task. The FAA reauthorization bill in question, HR 4441 (the AIRR Act), is all they had to work with. Since the House Ways & Means Committee has not yet written the tax title for this bill, CBO was required to assume that all existing aviation excise taxes would remain in place-even though new ATC user charges would fully pay for the corporation’s capital and operating costs.
CBO then made things worse by assuming that the new, self-supporting corporation, “would effectively act as an agent of the federal government” in providing ATC services. Therefore, the report says, “fees charged by the proposed corporation should be recorded as federal revenues, and its expenditures should be classified as federal direct spending.” Based on that bizarre assumption, CBO’s projection factors in both the existing aviation taxes (which mostly support ATC provided by FAA) and the new ATC user fees. Nobody who supports corporatization-certainly not the airlines who are pushing hard for this change-would support this kind of double payment for ATC services. A4A’s support, like that of Business Roundtable, is based on the aviation taxes being cut back by the same amount as the revenue produced by the ATC corporation’s user charges.
OK, that is one huge distortion of reality. But how does CBO get from that excess of revenue to an increase in the federal budget deficit? Part 2 of this little budgetary game is that by assuming there would be net new “taxes” (the ATC fees plus the continued aviation taxes), CBO applied its standard calculation of the negative impact on revenue of “federal tax increases.” This led to its estimate that “revenue from the fees collected by the corporation would be partially offset in the federal budget by a loss of income and payroll tax receipts equal to about 25 percent of the fees each year.” And that is the source of the alleged deficit increase of $19.8 billion from 2020 through 2026.
Assuming Ways & Means does its job and reduces aviation excise taxes by the amount needed for the capital and operating costs of the ATC Corporation, there would be no net “federal tax increase” and hence no negative impact on revenue from income and payroll taxes. As Jeff Davis noted in Eno Transportation Weekly, “the Congressional budget system is not really set up to handle legislation like Chairman Shuster’s proposal to take air traffic control out of the federal government.” This ridiculous scoring exercise beautifully illustrates that point.
Further Thoughts on the ATO’s Assets
In last month’s issue I explained my reasons for thinking that the new ATC Corporation should not have to buy the assets used by the Air Traffic Organization: (1) because this is a re-organization of the existing ATO, not its purchase by an outside party; (2) because these are sunk costs for mostly obsolete assets that need to be replaced, and (3) because paying billions for these assets (which aviation users have already paid for via dedicated aviation excise taxes) would add significantly to the user charges they would have to pay going forward, for no good reason.
I got a number of emails from knowledgeable people, some agreeing and some opposing. The most interesting one was from George Donohue, who knows FAA from the inside, having served four years as Associate Administrator for Research and Acquisitions. Donohue is now Professor Emeritus of Systems Engineering at George Mason University, and his pre-FAA career included stints at DARPA and RAND Corporation. With his permission, I am sharing his comments with you:
“I was a strong proponent of moving the ATC system out of the U.S. government when I was David Hinson’s Associate Administrator. (It was one of the reasons he hired me, to make the move to the private sector, since none of the [other] FAA executives was in favor of the move.) It was one of the reasons that Vice President Gore got me the nomination to become the Deputy Administrator. . . . My book [Terminal Chaos: Why U.S. Air Travel Is Broken and How to Fix It, co-authored with Russell D. Shaver III, AIAA, 2008] made a point of this necessity to achieve modernization. I was making this point to the NAS committee that reviewed NextGen [in 2015] and got some of this language into the final report. In my recent interview with GAO [on transition issues], I told them that my estimate was that the current ATC assets were worth zero! The computers are mostly beyond a six-year maximum economic lifespan, the Centers should be reduced from 20 to fewer than six (sell the land), the ADS-B system is not owned by the FAA (but paid for as a service), the primary radars are now mostly used for a national and homeland defense security requirement that the government should pay for in any case, and NextGen digital data links will be privately owned and operated (as a service like ADS-B). Most of the new infrastructure is not owned by the U.S. government because there has been no funding to purchase it, and the FAA has had to out-source the new systems to the private sector anyway.”
I think his perspective says a great deal.
FAA Cheating Scandal Emails Are Missing. In response to a lawsuit filed by would-be air traffic controllers protesting alleged assistance to help some applicants cheat on the Biographical Assessment, the FAA on February 29th filed a motion in Federal District Court in Arizona to dismiss a congressional Freedom of Information Act request to release emails between FAA employees accused in the lawsuit. FAA had turned over some of the emails but withheld 181 documents, which it now says are unrecoverable. Attorney Michael Pearson, who is representing applicants who are suing the agency, told Fox Business that “It’s obvious to me they are hiding embarrassing information.” (Note: for background on this story, see my article “New Revelations re FAA’s Revised Controller Hiring,” ATC Reform News, June 2015.)
Control Tower Competition Increasing in U.K. Air Navigation Solutions Ltd. completed its takeover of control tower operations at London Gatwick Airport at midnight on Feb. 29th. The company, a subsidiary of DFS (the German air navigation service provider), won the competition last year against incumbent provider NATS (the U.K.’s ANSP). The contract is for 10 years. Gatwick is the world’s busiest single-runway airport.
More Newspapers Endorse ATC Corporatization. Last month two more leading newspapers endorsed corporatization of the U.S. air traffic control system. USA Today (March 2nd) concluded its thoughtful editorial by saying, “Despite [various] concerns, if a spinoff could improve the system without costing passengers more or silencing the public’s voice in air traffic control, it would be worth doing.” The Denver Post followed up (March 12th) noting that the House proposal is not “privatization” as charged by opponents, and concluded by saying, “Most other advanced countries already separate air traffic control from the regulation of safety. The U.S. would do well to follow suit.”
Dominican Republic Opts for GPS Landing System. The leading airport in tourism-oriented Dominican Republic, Punta Cana International Airport, will soon be equipped with Honeywell’s Ground-Based Augmentation System (GBAS), the world’s only FAA-certified GPS landing system. GBAS is far more cost-effective than a traditional instrument landing system (ILS), and is either operational or under way at 15 major airports worldwide, including Bremen, Frankfurt, Houston, Newark, Shanghai, Sydney, and Zurich.
Air Force Won’t Meet 2020 Deadline for ADS-B Equipage. On March 1st, USAF officials told a House committee hearing that it will be unable to meet the FAA’s 2020 deadline for equipping U.S. aircraft with ADS-B equipment (which continuously broadcasts the aircraft’s position, heading, etc.). Because military transports and tankers make the greatest use of civil airspace, they will be equipped first, but even the fleet of C-130 transports will not all be equipped by 2020, said Lt. Gen. Mike Holmes. The total cost to equip all military aircraft, he said, is $5.6 billion, of which USAF’s portion is $4.4 billion-and the agency says it is $1.2 billion short of that sum.
Two Pilots’ Unions Endorse ATC Corporatization. Two large airline pilots unions have endorsed the House FAA reauthorization bill that includes converting the FAA’s Air Traffic Organization into a federally chartered nonprofit ATC corporation. Both the Allied Pilots Association (15,000 American pilots) and the Southwest Airline Pilots Association (8,000 Southwest pilots) endorsed the bill in March. The stakeholder board proposed in the bill calls for one seat to be nominated by pilots’ unions.
Common ATC Upgrade Making Headway in Europe. A group of European ANSPs had formed an alliance to procure common air traffic management software. The latest ANSP to join the iTEC Alliance is Norway’s Avinor, a pioneer in remote tower implementation. Founding members include DFS (Germany), ENAIRE (Spain), LVNL (Netherlands), and NATS (UK), along with systems provider Indra. Both Oro Navigacia (Lithuania) and PANSA (Poland) have also expressed interest in joining.
IATA Endorses U.S. ATC Corporatization. Speaking at the Wings Club in New York, the head of the International Air Transport Association, Tony Tyler, called for faster modernization of the U.S. air traffic control system. Calling the present system inefficient and incapable of cost-effective modernization, he concluded that “We support legislation to modernize the system through the creation of an independent, corporatized nonprofit entity to perform these services.”
Wide Area Multilateration for Two Colombian Airports. Saab announced on March 30th that it has been selected by Aeronautica Civil de Colombia to provide Wide Area Multilateration (WAM) and ADS-B surveillance for the airports at Cucuta and Medellin. This combination of technologies is a more-precise and cost-effective alternative to ground-based radar, and will improve surveillance at the airports in in the non-radar airspace between them.
HungaroControl Goes to All Free-Route Airspace. Hungary’s corporatized HungaroControl last year became the first ANSP in Europe to abolish all fixed air routes in favor of free-route airspace. This enables aircraft operators to select the shortest route from entry point to exit point of Hungarian airspace. With the one-year anniversary celebrated last month, the ANSP reports that it maintained safety performance in 2015 despite a 13% increase in traffic. Airlines that previously routed around Hungarian airspace due to lack of direct routes are now routing over Hungary. HungaroControl estimates that as more airlines do this, they will save an aggregate 1.5 million kilometers per year, with associated fuel savings.
“The FAA performs a minor miracle each day by keeping planes on 80,000 flights from running into one another. Managing change, however, isn’t the agency’s core competency. The FAA’s Kafkaesque bureaucracy is so constricting that a former Administrator once privately complained that he lacked the authority to hire a secretary. Not a deputy secretary or an assistant secretary: a regular secretary to answer the phone.”
-Roger Cohen, “Why Upgrading Air Traffic Control Is Stuck in a Holding Pattern,” The Wall Street Journal, March 27, 2016
“Many [U.S.] administrations have attempted to develop and implement new technologies to improve the flow of aircraft through the nation’s skies and around ever more gridlocked airports. All have failed. Yes, there continues to be opposition to the idea of spinning off air traffic control into a government-chartered non-profit operating company governed by a board of federal experts and industry appointees. But never before has the United States with its hugely complex air traffic environment stood to gain so much from the heartening momentum for change. Some say the FAA has become the laughing stock of the global air traffic management industry, notorious for chronic false starts, delays, missed deadlines, and scant comprehension of what is either needed or possible. . . . Failure to embed the correct institutional framework will, however, only lead back to an inflexible, sclerotic regime where vested interests represent the primary obstacle to change.”
-Aimee Turner, “Future Proofing,” Air Traffic Management, Quarter 1, 2016
“I just wanted to briefly put on the record. I have studied the I.G. and GAO reports on the dysfunction, on NextGen, and we have a crisis in air traffic control in this country in terms of how far behind we are. And I just want to urge the Chairman and Ranking Member to continue to work on this. I don’t know what the right answer is. I’m not trying to say that what’s been proposed in the House is something I’m in favor of or is the right idea, but I do know we are ignoring a serious issue in our air traffic control, probably more serious than cyber-attack and much more serious than many other issues that we are tackling in this reauthorization. So I just wanted to put on the record that I’m happy to work with anyone to try to move forward, because as somebody who studies the I.G. and GAO reports, it’s not a pretty picture right now. And we need to get busy and try to see if we can figure out a way forward.”
-Sen. Claire McCaskill, (D, MO), Senate floor, March 16, 2015 (AIN Online)
“More than 50 other nations have moved to this concept in one form or another-some decades ago. And none of them have chosen to reverse course or opted to return to their previous systems. Indeed, while the U.S. will be one of the last major countries to change, it will have the distinct advantage of being able to adopt the best practices of those before us to ensure a smooth and seamless transition. . . . The plan on the table is not one to change technology or direction, but rather a plan to assure steady, long-term financing and to lift constraints on moving forward with NextGen more quickly and decisively.”
-Doug Parker, CEO American Airlines, remarks at U.S. Chamber of Commerce Aviation Summit, March 22, 2016
“John Crichton, the [Aviation Week] Laureate in Civil Aviation, has been at the forefront of an international movement to shift air traffic management from government bureaucracies to customer-focused, technologically nimble, independent organizations. . . . During his tenure, Nav Canada has become a pioneer in the use of Automatic Dependent Surveillance – Broadcast (ADS-B) and made significant improvements in the transatlantic corridors that it manages, the busiest oceanic airspace in the world. Nav Canada was cited in recent congressional hearings as a model for what might be done with the FAA’s Air Traffic Organization. It has also influenced air traffic management beyond its borders through the export of technology to other countries. With Crichton at the helm, Nav Canada helped spur the development of Aireon, which is working to make use of satellites to offer global coverage of remote oceanic airspace.”
-James Asker, “Air Traffic Innovator,” Aviation Week & Space Technology, March 28-April 10, 2016