In this issue:
- TSA PreCheck expansion controversy
- New thinking on airport Passenger Facility Charges
- Should airport workers be screened?
- Slot auctions vs. runway pricing
- Los Angeles vs. Ontario: the saga continues
- News Notes
- Quotable Quotes
Just-retired TSA Administrator John Pistole deserves our thanks for finally implementing risk-based screening, more than a decade after Congress mandated it in the 2001 legislation creating TSA. The Aviation & Transportation Security Act of 2001 called for TSA to create “trusted passenger programs . . . to expedite the screening of passengers who participate in such programs, thereby allowing security screening personnel to focus on those passengers who should be subjected to more extensive screening.” After the fiasco of “Registered Traveler” under Pistole’s predecessor-which required participants to be fingerprinted and iris-scanned but did not provide expedited screening-it was Pistole who pushed hard to implement genuine risk-based screening in the form of PreCheck. As of the end of 2014, PreCheck has 600 lanes in place at 124 airports, with 802,000 passengers enrolled.
The agency is now in procurement for one or more contractors to expand enrollment by setting up convenient enrollment centers at large workplaces, office parks, and other venues. The contractor(s) will use TSA-approved algorithms to review and assess available data about applicants, sending the lowest-risk names to TSA for the agency’s decision on actually enrolling them in PreCheck.
Having big-data companies involved in marketing PreCheck and partially vetting applicants has aroused critics, who cite Big Brother concerns similar to those raised early in TSA’s life over its proposed CAPPS II pre-screening system. That TSA project had planned to use information from commercial databases, among other things, to distinguish among high-risk, medium-risk, and low-risk travelers for purposes of airport screening. Yet the proposed third-party enrollment effort differs in two fundamental ways from the never-implemented CAPPS II. First, it is voluntary, applying only to those who decide to opt in, rather than to all air travelers. Second, it is not aimed at identifying potential terrorists; it is intended to identify the lowest-risk people among the set of those applying and to forward only those names to TSA for potential enrollment in PreCheck.
In addition to media critics, the Deputy Director of George Washington University’s Center for Cyber and Homeland Security, Christian Becker, has just released a short report, “Risk-Based Security and the Aviation System: Operational Objectives and Policy Challenges,” that criticizes the proposed private-sector vetting effort. Becker says the program will create new risks, since is likely to be “less robust than the current process in terms of authenticating applicants and vetting them from a security standpoint.” He also argues that TSA has already expanded PreCheck to such an extent that “any new groups or categories of already-vetted individuals are likely to be relatively small as a share of air travelers.” Both contentions are wrong.
To understand why, turn to the latest report on PreCheck from the Government Accountability Office: “Aviation Security: Rapid Growth in Expedited Passenger Screening Highlights Need to Plan Effective Security Assessments” (GAO-15-150). GAO documents the various lists of travelers who are now, by definition, eligible for PreCheck screening, including 2.2 million DOD military personnel, 2.5 million trusted travelers in Customs & Border Protection programs such as Global Entry, and nine smaller lists, totaling 5.6 million. But the number of people in those programs who take commercial flights on any given day is small.
By contrast, in autumn 2013 the number of monthly passengers getting PreCheck screening exploded, from a bit over 2 million in September 2013 to more than 12 million by December 2013 (Figure 4 in the GAO report). What accounts for that huge increase is two new TSA programs to shift non-enrollees into PreCheck lanes: “Risk Assessment” and “Managed Inclusion.” Under the former, TSA uses an algorithm to review the passengers on a specific flight, to determine “whether the passenger is low risk on a per-flight basis,” whatever that means. TSA tells the airline in question to encode PreCheck eligibility on the boarding passes of those selected. (This is how some of your friends who have never signed up sometimes find the PreCheck logo on their boarding passes.)
Managed Inclusion is even worse. This process takes place entirely at the airport, and “is designed to provide expedited screening to passengers not deemed low-risk prior to arriving at the airport.” As GAO candidly reports, it is aimed at shifting such passengers “into the expedited screening lanes to increase passenger throughput in these lanes when the volume of TSA PreCheck-eligible passengers is low.” (In other words, it’s a throughput program, not a security program.) TSA uses a “randomizer” to select passengers to enter a Managed Inclusion queue, where they are looked at by a Behavior Detection Officer (BDO) and possibly sniffed by a canine or swabbed for explosive traces. TSA calls this process “real time threat assessment.” I call it a joke. GAO is more polite. It once again reminds us that TSA “has not demonstrated that BDOs can reliably and effectively identify high-risk passengers who may pose a threat to the U.S. aviation system.”
Thus, far from exhausting the market for PreCheck-eligible people, the third-party enrollment program has a vitally important role to play. And that role is to find genuinely low-risk travelers instead of the millions of people now being diverted into PreCheck lanes via the questionable Risk Assessment and Managed Inclusion programs. Since GAO failed to recommend that the third-party enrollees be replacements for the millions now questionably diverted into PreCheck lanes, Congress should mandate that those two programs be ended immediately (or certainly no later than when the third-party enrollment process is up and running).
With FAA reauthorization on Congress’s agenda this year, the perennial battle between airlines and airports over airport passenger facility charges (PFCs) is shifting into high gear. The two principal airport organizations-ACI-NA and AAAE-have formed a joint lobbying effort called Airports United. Increasing the federal cap on PFCs from the current $4.50 to $8.50 is first on its list of eight core issues for Congress.
Shedding some useful light on the debate is a new report from the Government Accountability Office: “Commercial Aviation: Raising Passenger Facility Charge Would Increase Airport Funding, but Other Effects Less Certain” (GAO-15-107). The main take-away from this report is GAO’s finding that the likely reduction in airline passengers due to any of the likely PFC increases would be very small. As calculated by GAO using best-available estimates of the elasticity of demand (-0.8), the reduction in airline revenue (and hence in Aviation Trust Fund ticket tax revenue) ranges from a low of 0.58% (current PFC cap adjusted for inflation using the CPI) to a high of 1.68% for the $8.50 cap. These numbers are all for revenue in 2024, nine years after the assumed start of the higher PFC in 2016. But given that airlines, the FAA, and nearly everyone else assumes that air travel will continue increasing between now and 2024, the Trust Fund impact simply means the growth in its revenue will be slightly less than otherwise, not that it would go down due to the higher PFCs. So that’s one score in favor of the airports.
A second potential score for airports appears without comment on page 8 of the report. GAO finds that “All these taxes and fees [including the PFC] are part of the ticket purchase transaction and together make up 13.7 percent of the total cost of a ticket on average, with the PFC representing about 2.9 percent of the total ticket cost.” That’s considerably less than the 20% regularly cited by Airlines for America as the fraction of a “typical $300 roundtrip domestic ticket” consisting of aviation taxes. GAO provides no details on how it arrived at its number, and A4A does not make it easy to see whether their number is actually typical or something of a worst-case example.
Airline rhetoric on a potential PFC increase seems to have improved over the last year or two. In prior battles, conservative non-aviation-savvy members of Congress were often bamboozled into opposing an increase by the claim that it would be a “huge federal tax increase.” In fact, PFCs are not federal, nor are they a federal tax. They are local, employed at the option of each airport, and they meet a legal and common-sense definition of a user fee (or perhaps user tax) in that they can only be used for FAA-approved capital improvement projects at the airport in question. At least we are not hearing that kind of baloney this time around.
A new white paper from ICF International calls on the airport community to think more strategically about the overall U.S. aviation program, heading into the 2015 reauthorization. The airports’ focus should be directed more towards finding common ground with other key aviation stakeholders on de-politicizing aviation infrastructure funding, thereby reducing Washington’s control of aviation. The author of the paper is Steve Van Beek, who served three years on the FAA Management Advisory Council (2011-2013) and helped author its unanimously approved recommendations for reform. The four main recommendations were to eliminate general fund support for aviation infrastructure in favor of 100% user fees, to separate the air traffic control system (the Air Traffic Organization) from the FAA with user funding, to repeal existing federal user taxes, and to provide a new governance-by-stakeholders mechanism for the independent Air Traffic Organization. The MAC report showed in detail why the current federal aviation funding system is unsustainable.
Van Beek told Aviation Daily (Feb. 2, 2015) that “If airports and other interests focus solely on their parochial needs, the most-likely result is a status-quo bill that does not address airport or industry’s needs.” The large-scale reform envisioned by the MAC would obviously have to address airport capital improvements and how to fund them, but within a context very different from the status quo-especially if all existing aviation excise taxes were repealed, as the airlines want. That would open the door for airport groups to advance a bolder proposal for airport self-funding, rather than simply tinkering with the present combination of PFCs and AIP grants. If airlines are serious about scrapping the existing aviation taxes, they have an obligation to help figure out how the airport infrastructure they depend on can be adequately funded going forward.
Last month brought news that a Delta worker had been arrested in New York and charged with smuggling guns from Atlanta to New York on 17 Delta flights during 2014. He apparently received the guns after clearing security screening from a Delta baggage handler in a rest room in the terminal. The latter brought the guns into the baggage area and went from there into the terminal to give the back-pack containing them to the worker for each of the 17 trips. The baggage area is part of the sterile area, beyond passenger screening. But there is no routine screening of airport workers arriving at the airport, and those employees have unescorted access to all parts of the airport, including the ramp and the terminal.
Atlanta is hardly alone in not screening employees. According to a well-researched article by Susan Carey in the Wall Street Journal (Jan. 28, 2015), only two of the 450 airports with TSA passenger and baggage screening regularly screen all employees with access to secure areas: Miami and Orlando. Other airports rely on (1) required background checks of employees, including an FBI criminal history check, and (2) random screening. Generally speaking, airports and airlines have argued that 100% employee screening would not be cost-effective.
While I have never seen a decent benefit/cost analysis of 100% employee screening, that is certainly the kind of analysis that should precede any decision to mandate such screening. The Wall Street Journal article cites a GAO report that told of a TSA contractor in 2008 testing enhanced screening at several airports, leading it to estimate a cost range of between $5.7 billion and $14.9 billion per year for total employee screening at all TSA-served airports. That would be a huge increase in TSA’s current budget of $7.3 billion a year. While those cost estimates should give us pause, there are several problems with those numbers. First, they assume that TSA itself would be doubled or tripled in size to do the screening. Second, they fail to consider a much less costly alternative: increased random screening.
The article reports that 100% employee screening at both Miami (MIA) and Orlando (MCO) is carried out by security contractors, not TSA. MIA’s was begun in 1999, after a much-publicized bust of a guns-and-drugs smuggling operation that involved 58 airline and catering workers. MCO launched its employee screening operation in 2007, after publicity over two Delta commuter workers who were smuggling drugs and guns to Puerto Rico. Although MIA is larger in terms of passenger volume, its program costs less than MCO’s, with MIA’s currently at $3.1 million a year and MCO’s at $3.5 million a year. In 2013 those two airports handled 4.9% of total U.S. passenger enplanements, and their employee screening budgets totaled $6.6 million. If we assume (unrealistically) that their cost of screening would be 4.9% of the total if all airports contracted for employee screening, that total would be $135 million a year-a minuscule fraction of the estimated cost of a national TSA-run employee screening operation. Even if we doubled or tripled that $135 million figure, to account for diseconomies of scale at smaller airports, it is still a tiny number. At MIA, employee screening constitutes 0.3% of its $955 million annual budget; the figure for MCO is 0.8% of its $406 million budget. Those cost blips are covered by overall airport revenues, mostly derived from airline fees and charges.
Numbers like these put a whole different light on the benefit/cost calculation-which still needs to be done. While none of the publicized incidents-at Atlanta, Miami, and Orlando-has involved terrorists, they have illustrated security vulnerabilities that terrorists could certainly exploit. It’s long past time to take those vulnerabilities seriously.
Last month the FAA issued a Notice of Proposed Rule Making (NPRM) about new rules for allocating landing slots at the three routinely congested New York area airports: Kennedy (JFK), LaGuardia (LGA), and Newark (EWR). The current FAA slot rules will expire on Oct. 29, 2016, so this is FAA’s first step in getting inputs on their replacement.
The NPRM offers five alternative ways of creating a new auction process for under-used slots, hoping this will provide incentives for airlines to sell such slots to airlines that can make better use of them. It would slightly strengthen the current 80% use-it-or-lose-it rule for slots at these airports.
Unfortunately, left unaddressed is the alternative of runway pricing as a method of getting the most productive use out of a congested airport’s limited capacity. Back in 2007, Ben Dachis and I produced a major Reason Foundation study analyzing how market pricing would change how airlines use JFK, LGA, and EWR under a pricing system in which runway charges were set for each quarter-hour period of the day, based on estimated demand. Our modeling showed significant up-gauging of aircraft and a reduction of peaks and valleys in runway use over the course of each day.
In an article in this newsletter’s December 2007 issue, I noted the advantages of runway pricing over slot auctions. A brief summary of these advantages is as follows:
- Pricing would produce large near-term reductions in runway congestion compared with slot auctions, which in any likely model would affect usage only at the margin, over many years.
- A pricing system would underscore that airlines do not “own” slots, as the U.S. DOT has always insisted, despite airline claims that they do.
- All airlines, including foreign carriers, would pay the runway charges, which would simply be an expansion of airports’ long-standing authority to charge for runway use. Under current U.S. practice, foreign carriers are generally exempt from slot allocations.
- Non-scheduled operators, such as fractionals and corporate jets, would have better long-term access to airports like LGA and JFK under a pricing system than under a slot system.
- Congress would be less likely to impose exemptions and controls on a runway pricing system than on a slot system, since runway pricing is traditionally a matter for airports and airlines, not legislators.
Few aviation people seem to be aware that runway pricing is legal in the United States, thanks to the efforts of the U.S. DOT under former Secretary Mary Peters, who introduced pricing-friendly changes to DOT’s airport rates and charges policy in 2008. The Air Transport Association litigated against the changes, but they were upheld by the Court of Appeals in July 2010. You can get a quick overview of the issues involved from a four-page September 2010 briefing paper from aviation consultants LeighFisher, “New Congestion Pricing Ruling: What It Means and Ways It Can Be Applied.” (www.leighfisher.com/sites/default/files/free_files/focus_congestion_pricing_ruling_sep2010.pdf)
Although no U.S. airports have implemented this kind of pricing, the report cites three examples from Europe. London Gatwick’s landing fees vary by time of day and season of the year, and the highest peak rates are 205% greater than non-peak rates. Manchester (U.K.) also has peak rates during busy periods of the day, as well as seasonal rates; rates also vary by aircraft noise category. Prague charges time-of-day aircraft parking fees, with peak rates 100% more than non-peak rates.
The report also explains what is and is not possible under the revised DOT rates and charges policy. And it notes that runway pricing cannot be imposed by the FAA; it is an option available to airports.
The long-running battle continues over control of Ontario International Airport, in the eastern part of the greater Los Angeles metro area, with an important new development in court last month.
If you’re new to this subject, the City of Ontario back in 1967 entered into a joint powers agreement with the City of Los Angeles, under which the former sold the underutilized Ontario airport to the latter, whose city airport department-Los Angeles World Airports-owns and operates LAX and Van Nuys, in addition (since 1967) to Ontario. As part of the deal, LAWA agreed to spend at least $20 million to expand the airport in hopes of attracting more airline service. LAWA replaced the old terminal with two new ones, at a cost of $270 million, and enplanements increased from 400,000 in 1967 to more than 6 million a year in the 1990s.
In response to local opposition to expanding runway capacity at LAX, transportation planners in the greater LA region came up with the idea of “regionalization,” envisioning a new regional airport authority that would distribute airline service among Burbank, LAX, Long Beach, John Wayne (Orange County), and Ontario. No such entity was ever created, but many elected officials gave lip service to the concept.
Unfortunately, in the mid-2000s the Southern California housing market collapsed, and one of the side effects was a decrease in air travel. The same phenomenon affected much of the country, known as the Great Recession. While it affected all airports, smaller hubs were generally hit harder than larger ones, and the greater LA region was no exception. In 2000, Ontario’s share of the greater LA airline passenger market was 8.8%. It was still at 8% in 2007, at the start of the recession, but has declined steadily since then to 4.5% in 2013. (ONT showed a slight increase in 2014, but full-year figures are not yet available.) Between 2007 and 2013, LAX’s market share increased from 69.3% to 75.4%.
Ontario city officials blame LAWA for neglecting ONT, as if airport managers could force airlines to increase service to an airport, when this is clearly-both as a matter of business decision-making and the law-entirely an airline decision (subject, of course, to being able to lease gate space and being willing to pay what it costs). Ontario’s case also ignores the general phenomenon of smaller hubs generally losing service during the past 10 years. Comparing enplanements in 2013 with those of the prior year, FAA data show the following average changes:
- 30 large hubs: +1.51%
- 35 medium hubs: -0.54%
- 35 smaller hubs: -0.58%
- 35 smallest hubs: -1.18%
Within each category, of course, there are significant variations, including a few sharp deviations from the trend. ONT is in the medium-hub category, and its enplanements decreased 8.02% in 2013 from the previous year. The best performing medium hub was New Orleans Louis Armstrong, up 6.59%. But the worst performer was Memphis, down a whopping 31.51%. And Memphis has no large hub nearby that can be blamed for stealing traffic!
The long-running litigation by Ontario against Los Angeles reached a key decision point on January 22nd, when Superior Court judge Gloria Connor Trask decided that (1) the 1967 agreement was, in fact, a sale of ONT to Los Angeles, and (2) that the four-year statute of limitations (on voiding or changing the deal) had long since passed. So those two problems are now presumably put to rest. Still pending is the rest of the lawsuit, which alleges breach of contract and violation of fiduciary duty by LAWA; that case, alas, will be heard by a jury later this year.
IATA Disagrees with PFC Article. Perry Flint of IATA headquarters in Montreal responded to the article last issue contrasting IATA’s general policy favoring “passenger-based airport charges” with the opposition by U.S. member airlines to the use and expansion of passenger facility charges in this country. He pointed out that IATA “strongly opposes any lifting of the [PFC] cap at this time.” He noted that “while it is correct that-as a general policy position-IATA recommends direct charges on passengers to progressively recover aeronautical infrastructure costs, this is only after the cost itself is justified and has been subjected to a meaningful consultation with users.” And that, he maintains, is not the case with the U.S. PFC program, whose flaws, he wrote, include the absence of any meaningful consultative role for airlines in the process, the lack of any requirement for a rigorous cost/benefit analysis, and “PFC investment criteria that are so broad as to justify virtually any new spending related to airport infrastructure.”
New Screening Contractors at Two Airports. The TSA has selected Trinity Technology Group to be the screening contractor at Sarasota-Bradenton Airport in Florida, starting February 1st. Airport CEO Fredrick Piccolo said the main reason for switching from TSA to contract screening is to get increased flexibility in scheduling screeners, to provide better service to customers. And at Kansas City International, Akal Security will be replacing FirstLine Transportation Security as the screening contractor. KCI was one of the five airports in TSA’s original private screening pilot program, and has held the contract since 2002. When its latest contract was due to expire, TSA selected Akal as its preferred bidder.
Airport Privatization Change in Turkey. TAV Airports, which currently operates Istanbul Ataturk International Airport, has begun planning for the day when Ataturk is shut down after Istanbul’s huge new airport opens a decade or more from now. Rather than bidding on that project, TAV is increasing its investment in Istanbul’s second airport, Sabiha Gokcen. Last fall it purchased Limak Group’s 40% stake in Sabiha Gokcen and will become equal partners with Malaysia Airports in this airport. They plan to open a second runway by 2017 and a second terminal by 2025.
Two Finalists for LaGuardia Terminal PPP. Agreement was reached just before the holidays between the governors of New York and New Jersey and the Port Authority to complete the ongoing public-private partnership procurement of a design/build/finance/operate/maintain consortium for the $3.6 billion replacement of the Central Terminal at LaGuardia Airport. The two finalists are LGA Gateway Partners (including Meridiam/Vantage Airports Group/Skanska) and LGA Central Terminal Consortium (including GS Global Infrastructure Partners II/Zachry Construction/Aeroports de Paris). Final selection is to occur during the first quarter of this year.
Porter Airlines Sells Toronto Terminal. Spunky Porter Airlines, whose home base is its terminal at Billy Bishop Airport on an island in downtown Toronto, has finalized the sale and lease-back of its terminal. The buyer is Nieuport Aviation Infrastructure Partners, a relatively new infrastructure investment fund. The airport is Canada’s ninth busiest, and served 2.4 million passengers in 2014. Shortly before the sale, Air Canada announced that it is considering ending its service at Billy Bishop.
$4 Billion People Mover for LAX Approved. The board of Los Angeles World Airports has green-lighted the Landside Access Modernization Program (LAMP) for LAX. The $4 billion project will add an off-site check-in facility, consolidated rental car center, and the LAX Automated People Mover. (OK, as reported last issue the APM itself will account for “only” about half of the $4 billion total, which still means it will cost about a billion dollars per mile.)
Paulding Atlanta Airport Facing New Opposition. In November the FAA approved the start of an environmental assessment of the plan by Paulding County Airport and Propeller Investments to build a small passenger terminal and help the fledgling airport attract some scheduled passenger service. But opponents bankrolled two anti-airport candidates for the five member County Commission, who won in November and took their seats this month, creating a new 3-2 majority against the airport plan. Last fall the former County Commission voted to give most of the control of the airport to the airport’s own board. The new Commission on Jan. 16th voted 3-2 against commercial service at the airport. Both Propeller and the anti-airport commissioners have complained to the U.S. DOT about the other side’s position in this controversy.
Berlin’s New Airport to Open in 2017-Maybe. Originally set to open in late 2011-and appearing to be finished-Berlin’s ill-fated new airport, on the site of the former East Berlin Schoenefeld Airport, has been plagued by construction defects and safety concerns. Last month brought word, via an AP story, that the opening will finally take place in the second half of 2017. I’m not holding my breath.
Chinese Firm Buys Half of Toulouse Airport. Shocking many French people, the winning bidder for a 49.99% stake in Toulouse-Blagnac Airport, announced last month, was Symbiose, a joint venture of Hong Kong-based Friedman Pacific Asset Management and state-owned Shandong High-Speed Group, a diversified Chinese transportation company. The other short-listed finalists were all French consortia, including such players as Vinci Airports and Aeroports de Paris.
DHS Inspector General Protests Redactions in Audit Report. The Inspector General of the Department of Homeland Security, John Roth, issued a news release on Jan. 23rd protesting actions by the TSA that redacted significant material in his audit report on security controls for DHS information technology systems at JFK International Airport. Roth objected to the designation of portions of the report as Sensitive Security Information (SSI), which is illegal to disclose to the public. However, Roth has furnished an unredacted version of the report to the congressional committees with oversight of TSA.
Privately Funded Airport Opens in Australia. Infrastructure Investor‘s latest issue reports the opening of Wellcamp Airport in Toowoomba, west of Brisbane, the country’s third largest metro area. The $172 million airport was financed and built by family-owned Wagners, one of Australia’s largest construction companies. The new airport has attracted airline service so far from Regional Express and QantasLink.
New Report on Airport Sound Insulation Programs. The Airport Cooperative Research Program of the Transportation Research Board has issued “Guidelines for Ensuring Longevity in Airport Sound Insulation Programs,” ACRP Report 105. It is a companion to Report 89, “Guidelines for Airport Sound Insulation Programs.” Both are available via the TRB website.
“[A]irports and their representatives should start by supporting MAC-like FAA reforms in the areas of financial sustainability, industry governance, and policy. Such measures would remove key parts of the aviation system from the political and budgetary process and place the operation of air traffic control, and investments in it, on more sustainable foundations.”
-Steve Van Beek, in Sean Broderick, “ICF: Time Ripe for Airports to Drop PFC, AIP Demands; Back Broad FAA Reform,” Aviation Daily, Feb. 2, 2015
“The Canadian government has just announced the opening of ‘fast-lane’ security screening at four of Canada’s busiest airports. But it doesn’t quite measure up. Unlike the U.S., these new lines won’t be accessible for domestic flights. Only those flying to the States will benefit from them. If a low-risk traveler is permitted to bypass regular screening for an international flight, why can’t they do the same when flying within Canada? The fact is that the bulk of Canadian air travel is domestic. So for the majority of NEXUS card holders, Transport Canada’s announcement will have no impact on them this holiday season. The government can and should do better by offering expedited screening at all major airports for both domestic and international flights.”
-Colin Kenny, former chair of the Canadian Senate Committee on National Security and Defense, “We Need to Fix Canada’s Half-Baked Airport Security System,” Huffington Post Canada, Dec. 31, 2014
“There is no way to make money off of an APM [Automated People Mover]. It’s essentially a sunk cost that you have to find other mechanisms to pay for. And they [airlines] worry all the time that the mechanism to pay for them is going to be them.”
-Gina Marie Lindsey, Executive Director, Los Angeles World Airports, in Brian Sumers, “LAX to Spend $4 Billion on Ground Transport Projects,” Aviation Daily, Dec. 22, 2014