In this issue:
- Rethink Airport Security in 2011?
- Privatization for Ontario International
- Supporting Regional Airports
- Air Marshals in First Class
- More Doubts on Body Scanners
- Upcoming conferences
- News Notes
- Quotable Quotes
Rethinking Airport Security-A 2011 Window of Opportunity?
Last month I took part in a panel at the Airports Council International-North America (ACI-NA) Annual Conference in Pittsburgh. Its theme was “Security: Rethinking the System.” Moderator Gina Marie Lindsey challenged us to suggest the kind of aviation security system we should implement if we could start over, with a clean sheet of paper, prior to creation of the TSA.
In my introductory comments, I made three recommendations which will be no surprise to readers of this newsletter. First, make the TSA a policy and regulatory body only, thereby removing its built-in conflict between service provision and regulation. Second, devolve the screening responsibility to each airport (as in Europe), under TSA oversight. And third, shift to a truly risk-based system that allocates resources in proportion to the risk, rather than trying to do a little of everything and treating all air travelers as equally likely to pose threats to aviation.
I was pleasantly surprised by the extent to which the other panelists seemed largely in sync with these ideas, especially the need for a risk-based approach. Panelist Stewart Verdery reminded us that the expert panel selected by the U.S. Travel Association will release its report on reforming aviation security in December, while Kenneth Dunlap of IATA stressed the need to shift aviation security’s focus from bad objects to bad people and end “one-size-fits-all screening.” During the lively Q&A session (which went into overtime), Lindsey asked the airport management people in the packed room to indicate by a show of hands whether they favored or opposed my proposal to devolve screening to airports (assuming there was no net cost increase to the airports). To her and my surprise, hands in favor outnumbered hands opposed by between two and three to one.
Then Lindsey challenged us again, with the question whether there is any reason to think there could be any significant changes in TSA. She pointed out that since its creation, there has never been a TSA reauthorization and asked if we could imagine any leverage points for getting the attention of Congress to the kinds of things we’d been discussing. Verdery suggested that 2011 being the 10th anniversary of the 9/11 attack could provide a focal point for reassessment. And I suggested that the new Congress to be elected next month might provide both a change of leadership on key committees and a willingness to rethink long-established policies. On screening, I reminded everyone that in the original 2001 Aviation and Transportation Security Act legislation, the House bill (which I worked on) would have allowed outsourced screening at all airports, in contrast to the Senate’s near-unanimous support for government provision. And the high budgetary costs of our screening “Maginot Line” could be a target for budget-cutters, if we can make an effective case that changes such as a risk-based Trusted Traveler program would both save money and make security more effective.
I came away from the conference less pessimistic than I’ve been in several years about the possibility of real reform of U.S. aviation security policies.
Will Ontario Airport Go Private?
Two recent reports paint a dire future for Ontario International Airport, one of several “secondary” airports in the greater Los Angeles region (in addition to Burbank, Long Beach, and John Wayne). In the last several years ONT’s passenger numbers have plummeted, and its cost per enplaned passenger (CPE) has risen to $14.50, more than double the national median of $6.76. That makes ONT far more expensive than the region’s other secondary airports–$9.83 at John Wayne (SNA), $5.34 at LGB, and just $2.10 at BUR. Ontario is now even more costly than LAX ($11).
Two reports-one from Los Angeles World Airports (parent of both LAX and ONT) in August and the other from the City of Ontario in September-document ONT’s declining position and assess the underlying factors. Both put forth solutions, but these differ considerably.
The City of Ontario report (“Ontario Airport-A Recovery Plan,” online at www.ci.ontario.ca.us/index.cfm/71595/71554) points out that successful secondary airports (such as Baltimore’s BWI, Burbank, Houston Hobby, Dallas Love Field, and Ft. Lauderdale) are characterized by lower costs than the metro area’s principal hub. Hence, they are able to attract low-cost carriers, in particular. ONT once had several, including both JetBlue and Southwest, but now retains only a scaled-back presence of the latter. By contrast, congested LAX serves nine LCCs, including even Allegiant, which nearly always serves secondary airports.
Why are ONT costs so high? LAWA’s report (“Alternatives for Management and Operation-LA/Ontario International Airport,” by Jacobs Consultancy-see www.ci.ontario.ca.us/index.cfm/71612/71578) points to operating and maintenance expenses per passenger more than twice as high as average for medium-hub airports. But the city’s report explains why those costs are so high: a much larger workforce than comparable airports, much higher compensation levels (averaging over $102K per employee), and an annual administrative fee of 15% of operating expenses paid to LAWA.
So how can ONT get out from under this costly structure? The LAWA/Jacobs report sets forth three alternatives: near-term cost-cutting by LAWA or longer-term, either a concession agreement under which the terminal and parking would be run by a third-party operator or a long-term concession for the entire airport (presumably under the federal Airport Privatization Pilot Program).
The city’s report rejects the first two, while remaining open to the third, “at least if Ontario is the public agency sponsoring the privatization.” But its preferred alternative is for LAWA to transfer control of ONT back to Ontario, reversing the 1985 Acquisition Agreement under which LAWA purchased the airport for a bit over $58,000, in effect taking it off the city’s hands.
It would appear then, that LAWA holds all the cards in this situation. Would it be in LAWA’s interest to give up control of ONT, as the city prefers? One could argue that LAWA has its hands full managing and modernizing LAX, as well as dealing with unhappy tenants at Van Nuys. It is also rhetorically committed to the “regionalization” of air service in greater Los Angeles, since LAX operates under a politically imposed cap on its maximum annual passenger numbers. But it’s hard to imagine LAWA “giving back” an asset that, even in its current depressed state, has a large asset value and solid long-term growth prospects (if it can slash costs and increase revenues).
Instead, a long-term lease that would provide an up-front payment to LAWA for relinquishing control of the airport but return ownership of the leased premises (and annual lease payments) to Ontario to administer would appear to offer benefits all around.
Supporting Regional Airports: A Cautionary Tale
We hear a lot about the difficulties small-hub and non-hub U.S. airports have in making ends meet. Some governments in other countries have responded to similar concerns by subsidizing such airports. But recent developments in two such countries-Italy and India-suggest that such policies may not be financially sustainable.
In Italy, national policy in the post-World War II era was to divest former military airports to local governments, with the idea of turning them into commercial airports to assist with economic development. Subsidies for those airports became a permanent part of the national government budget. One result, as Andy Nativi reported recently in Aviation Week (Aug. 9, 2010), is that “Northern Italy is littered with air fields, from Turin to Milan’s Malpensa, Linate and Bergamo, to Brescia, Verona, Treviso near Venice, to Trieste. A similar development has recently been playing out in the south.” But a recent report requested by Italy’s civil aviation agency calls for realigning government airport spending to focus on 14 “strategic” airports. Under the recommendations from the report by One Works, KPMG, and Nomisma, 24 local airports would be closed and another 10 secondary airports would be re-purposed as feeders. The transport minister says the report will form the basis for a new 20-year airport development plan.
In far less-developed (but fast-growing) India, the national government has not explicitly subsidized smaller airports. Instead, it has charged nothing for landing fees and parking charges at such airports, for aircraft with 80 seats or less, and for all helicopters. This policy applies even to the new privately developed regional airports, which are operating in the red (like their government counterparts) due to inadequate revenues. The Airports Authority of India, which operates 125 airports, has belatedly asked the government to change this policy. AAI argues that it is time to start charging for landings and parking by these aircraft, bolstering airport revenues.
In both Italy and India, what seems to be happening is a growing realization that for airports to be sustainable, they must operate as businesses, charging airlines for their services and developing services for which passengers are willing to pay.
Should Air Marshals Fly Coach?
Scott McCartney reported several weeks ago in the Wall Street Journal that airline CEOs met recently with TSA Administrator John Pistole to request that the agency reconsider its policy of nearly always requiring its air marshals to fly in the first class cabin. Since airlines must provide seats to air marshals at no charge, giving up (two or more) front-cabin seats cuts heavily into revenue and customer service (e.g., upgrades for frequent flyers) on those flights selected for air marshals.
But that’s hardly the only issue. The current deployment of air marshals is another example of TSA fighting the last war. The 9/11 attacks involved terrorists taking over the cockpits of several planes, ergo, air marshals must be seated close to the cockpit. Yet the aviation security community is virtually unanimous in considering the threat of cockpit takeover to be almost negligible these days, thanks to strengthened and locked cockpit doors, changes in crew procedures, and passenger vigilance. Far more important now is the threat of suicide bombers getting onto planes-and to create maximum damage, they might choose seats either near the wings (where fuel tanks are) or near the tail (where vertical and horizontal stabilizers are). So the case for seating air marshals up front is exceedingly weak.
And that’s only part of the argument against air marshals. The stronger argument is lack of relative cost-effectiveness, compared with other aviation security measures. First, we know that marshals end up on only a tiny handful of flights; that is a matter of simple math. Second, they cost a small fortune-both the direct costs of salary, hotel accommodations, etc. and the cost impact on airlines. Third, any plausible estimate of their likelihood of stopping a terrorist attack comes out very low. (Note: as McCartney points out, air marshals have not been on board any of the recent terrorism attempts against U.S. airlines.)
The best cost-effectiveness assessment I’ve seen comes from a 2008 paper by M. G. Stewart and John Mueller that I’ve reported on previously in this newsletter. Making an assumption that the set of in-flight changes made since 9/11 accounts for 50% of the reduction in 9/11-type attacks on aviation (with airport measures accounting for the other half), they then assign each of the three in-flight measures a potential one-third of that 50% (i.e., 16.7%). But since the probability that air marshals are on board any particular flight is (they over-generously assume) only 10%, the reduction due to air marshals alone is reduced to 1.67%. After factoring in the best available information on the annualized cost of hardened cockpit doors and of the air marshal program, they estimate that the annual cost per life saved is $800,000 for the doors and $180 million for the marshals. Their sensitivity analysis does little to change these relative magnitudes.
Given that relatively dismal cost-effectiveness, it seems to me that if we have enough intelligence information to assign air marshals to a flight, the passenger names triggering that assessment should lead to either no-fly or rigorous selectee status for such passengers, rather than assigning marshals to that flight. So, yes indeed, bump the air marshals to coach. But better yet, bump them off the flight.
More Doubts on Body Scanners
Privacy concerns about body scanners are still an issue for some, despite a detailed response on this question from TSA to Homeland Security Chairman Bennie Thompson (D, MS), in which the agency stated that the machines “are delivered to airports without the capability to store, print, or transmit images, and cannot be modified by the operators.” But I am far more concerned with the issues of effectiveness, processing time, and radiation exposure.
Having now been scanned several times by both millimeter-wave and backscatter X-ray machines, my experience is that instead of the 3 seconds or so that it takes to walk through a magnetometer, the process of being scanned seems to take around 30 seconds (though I can’t be sure, because you are separated from your watch during the process, and must assume the “I surrender” posture). The TSA says the actual scanning time is 5 seconds plus a 10-12 second wait for an OK from the remote-viewing room. Quite a few news articles from around the country cite 30 seconds as the observed elapsed time, but TSA counters that the real limiting factor in checkpoint throughput is carry-on bag screening time. That this might be the case is suggested by the common practice of splitting the bag screening for a set of passengers into two parallel bag-screening devices served by a single magnetometer (or now, a single body scanner). Still, TSA has not produced any overall before-and-after throughput figures for airports or checkpoints using body scanners for primary screening instead of magnetometers-which is the plan they are in the process of implementing. Until they do, I will remain a skeptic on the scanners’ impact on checkpoint throughput. (Footnote: Italy is apparently abandoning body scanners for primary screening, citing 30-second throughput times as well as privacy measures that reduce their effectiveness.)
Then there’s the question of effectiveness. It’s almost certain that body scanners cannot detect explosives concealed in body cavities. And in a widely-cited report, the Government Accountability Office stated that it is unclear whether a body scanner would have spotted the improvised explosive device in the Christmas bomber’s underwear. In addition, Israeli security consultant Rafi Sala has claimed that body scanners cannot detect plastic explosives in the shape of a girdle or bra (which could be detected by a thorough hand search). So how much additional protection are we really getting in exchange for the cost, privacy intrusion, and possible radiation exposure?
Speaking of radiation, it’s important to distinguish between two different types of radiation. Millimeter waves are essentially radio waves; they are not ionizing radiation, like X-rays, that pose a cancer risk. About half of the 1,000 body scanners ordered by TSA thus far are millimeter wave machines; the other half are backscatter X-rays. Those scientists raising concerns about “radiation exposure” due to body scanners are talking only about backscatter machines. And while some such scientists support the non-mainstream no-threshold view of ionizing radiation (that any dose, no matter how tiny, poses a cancer risk), even mainstream scientists have some concerns about backscatter machines, for two reasons. First, in a huge population (including small children and pregnant women), about 5% are especially sensitive to radiation, according to David Brenner of Columbia University’s Center for Radiological Research. Brenner served on the 2002 National Council on Radiation Protection and Measurements panel that wrote guidelines for body scanners. According to a report on NPR last spring, Brenner “now says that he wouldn’t have signed the report if he had known the X-ray scanners were going to be used on virtually every air traveler”-i.e., as primary screening. Second, nobody knows if the backscatter machines will, over time, produce spurious radiation, exposing people to higher than intended exposure.
I still think that using body scanners as primary screening for all air travelers is vast overkill-and the antithesis of a risk-based approach to screening. But if we can’t (at least for now) change that policy, I have two suggestions to address the radiation concerns. First, TSA should cease buying backscatter machines, and use those already purchased only for secondary screening. Second, the agency should equip the screening workforce that operates backscatter machines with radiation badges (like I wore as a summer research student in a biochemistry lab where radioactive materials were present, many years ago). That would collect useful data as well as warning screeners if radiation leakage were occurring.
Upcoming Conferences
Note: I don’t have space to list all aviation conferences here; below are those at which I or a Reason colleague will be speaking.
Airport Consultants Council 32nd Annual Conference, Nov. 8-10, Ponte Vedra Beach, FL, Sawgrass Marriott Resort. Details at: www.acconline.org/content/navigationmenu/ACCevents/annualconference
(Shirley Ybarra speaking)
Infrastructure Investor: Chicago, Nov. 18-19, Chicago, IL, Gleacher Center. Details at: www.peimedia.com/infrachicago10. (Shirley Ybarra speaking)
News Notes
Another Low-Cost Terminal
Japan’s Kansai International Airport, on an artificial island near Osaka, has announced plans to add a terminal for low-cost carriers. Even though the existing terminal has excess capacity, Kansai officials hope to make the airport more attractive for LCCs, by offering them no-frills accommodations. Kansai is currently served by two LCCs-Air Busan and Jeju Air-with service also planned by Jin Air and, if current negotiations succeed, by All Nippon Airways’ new low-cost carrier.
Naples Airport Sold to Italian Infrastructure Fund
BAA has sold its 65% stake in GESAC, the company which holds the concession for Naples Airport until 2043. The price was €150 million ($206 million). The sale, to an Italian infrastructure fund, is conditional on approval by the minority owners, the City and the Province of Naples. The sale completes a refocusing of BAA’s assets to its British airports and away from overseas airports.
Port Authority Seeks New Air Service at Stewart
The Port Authority of New York and New Jersey has launched two efforts aimed at adding air service to Stewart Airport, which it acquired several years ago. In addition to designing a terminal expansion project, it is putting in place an incentive program for new air service. The two-year program will offer airlines and charter operators up to $150,000 per new destination, as well as a credit for ground-handling service charges. The new terminal design is due for completion by the end of 2011, and will include a federal inspection service facility.
French Government to Part-Privatize Four Airports
France plans to offer up to 49% stakes in the regional airports of Bordeaux, Lyon, Nice, and Toulouse, according to a late-September Reuters report. The government has begun a bidding project to choose a financial advisor to oversee the privatization process, and an article in Les Echos named Macquarie and Vinci as candidates for that position.
Minute Suites to Add Philadelphia Location
The concept is simple: rent a tiny (8′ by 7′) but well-appointed room right in the airport terminal, either for a few hours or overnight. All you need is a quiet space with a bed and space to work-all the other services you need (including rest rooms and food) are already there in the terminal. After being well-received at Atlanta’s Hartsfield-Jackson International Airport, the company has announced its second location: Philadelphia International. The latter has signed up with Minute Suites for 1,455 sq. ft. of space, to accommodate 12 suites and two private workstations. I saw a mockup of a Minute Suite at the ACI-NA conference in Pittsburgh earlier this month, and I was impressed.
Quotable Quotes
“Forced slot auctions are not necessarily bad. But attacking conspiratorial slot hoarding by insisting on a transparent auction open to any airline is quite different from reshaping a market by forcing a rigged auction in which the only possible bidders are those few privileged airlines whom the feds, in their infinite wisdom, have decided can contribute most to public welfare. The DOT’s proposed order [re Delta/US Airways at LGA and DCA] adds up to a non-lethal version of one of the paradoxes of the Vietnam era . . . ‘we had to burn the village to save it.’ To ‘save’ competition, the DOT has combined some of the worst aspects of CAB regulation with some of the worst aspects of 60’s-era antitrust policy. Its proposed order guts airline deregulation and threatens the public benefits that deregulation has created over 32 years. . . .”
–Michael E. Levine, “Micromanaging Airline Competition,” Aviation Daily, March 16, 2010.
“Airports filled the [airline] customer service void and took the lead by promoting competition. Yet airports remain hampered by economic regulations that increase costs, reduce flexibility, and imperil service in many communities. Federal grants have been (the stimulus excepted) reduced. Those grants come with more than three dozen grant assurances, many of which can be eliminated. Passenger Facility Charges are still treated, in a regulatory sense, as if they were federal funds with far too many strings attached. Smaller airports have to comply with all the same regulations as larger airports, but with a fraction of the staff. They are drowning, and service to many communities could be in peril.”
–Greg Principato, “It’s Time to Deregulate U.S. Airports,” Centerlines, September 2010.
“[TSA’s] answers are very often political answers. Remember that we’re dealing with a high-profile government agency. Whenever there is a suspected attack on aviation, they look for a political response. That political response generally is to do something to appease the populace and make us feel safe. They will come forward with a concept which they think will lessen our fear about flying and perhaps boost our confidence in their ability to protect us. So they lose their focus because they’re giving us a political response.”
–Charles G. Slepian (Foreseeable Risk Analysis Center), “Aviation Insecurity,” The New Individualist, Spring 2010.
“At the end of many international trips, U.S. business travelers are likely to have wistful memories, not only of their destinations but of the airport experiences abroad. . . . Then comes the experience upon return to America-instant episodes of disrespect for others. . . . If competitiveness in international business is an increasing worry, then someone should intervene to correct for the bad vibes [ICE and TSA] send out, to citizens and visitors alike. No wonder their business is often done in joyless basements and choked corridors. In these dingy surroundings, there seems to be no recourse for the flier in danger of missing a connection . . . . TSA remains about the only airport security service I encounter still to have the silly shoes-off rule. Then there is the outer-garment rule, intended to thwart somehow hiding contraband in a jacket. I wore a thin cotton sweater on my flights back from rural Australia. Only once I hit Los Angeles, en route to New York, did this become part of the strip search. Of course, there is no appeal to the TSA autocrat who has the power to interrupt your transit.”
–Tim Ferguson, “Back to ICE-TSA,” Forbes.com, Oct. 4, 2010 (http://blogs.forbes.com/timferguson/2010/10/04/back-to-ice-tsa/)