Aviation Policy News: Airline Bailouts and Revenue Sources for Air Traffic Control During Pandemic

Aviation Policy Newsletter

Aviation Policy News: Airline Bailouts and Revenue Sources for Air Traffic Control During Pandemic

Plus: A supersonic project, satellite competition, high-altitude centers, and more.

In this issue:

Some Good News and Bad News on FAA’s High-Altitude Centers

On July 29, the U.S. Department of Transportation Office of Inspector General released its report, “FAA Has Begun to Update ERAM but Faces Challenges Realizing Full Benefits for Airspace Users.” It is Report No. AV2020040 on the OIG’s website. ERAM is the En-Route Automation Modernization system that was installed in all 20 domestic high-altitude Centers last decade. It included new computers installed in 2007-2008 and an enhanced version of the old software. After a number of delays, ERAM became fully operational in 2015.

The OIG report explains that although ERAM was planned before the NextGen program to modernize all of air traffic control, it has become a key platform for three core elements of NextGen: ADS-B for more-precise, GPS-based tracking of aircraft in flight; DataComm, under which controllers and pilots can send digital messages, which are generally faster and more reliable than voice radio; and Performance-Based Navigation (PBN), which allows shorter routes of flight with much less reliance on aging ground navigation aids.

The good news is that ADS-B has been integrated into ERAM at all 20 Centers. Unfortunately, DataComm and PBN have not become routine yet. DataComm has only been installed and become operational at two of the Centers (Indianapolis and Kansas City), which FAA blames on the one-month government shut-down in December 2018 and part of January 2019, and may have been further delayed by COVID-19 (though OIG does not mention that). And while some centers are using a PBN procedure called Time-Based Flow Management, this is not yet widespread due to lack of controller training. Both DataComm and PBN are top priorities of system users, represented on the NextGen Advisory Committee, so I’m sure users are frustrated by these delays.

I was dismayed by the report’s gentle treatment of the now-planned replacement of the ERAM computers installed only 12 years ago, but which OIG says “are no longer commercially available or repairable.” For a system that did not become fully operational until 2015, that’s a miserably short life. And the report says nothing about ERAM’s software. In the September 2015 issue of this newsletter, I quoted now-retired FAA consultant Gary Church on how the old HOST computers that ERAM replaced were programmed using ADA, overlaid on the architecture of its predecessor IBM 9020 system that was programmed in BAL and JOVIAL. He concluded by noting that ERAM “has continued to build on the basic automation functionality and architecture deployed in 1974. Think of it as remodeling a very old house with a crumbling foundation.” No wonder it takes so long to add functionality for ADS-B, Datacom, and PBM.

Even more alarming is the report’s low level of concern over FAA’s 2018 decision to re-categorize ERAM as a “moderate to high-impact system.” The National Institute of Standards and Technologies lists more than 70 security controls that might be required if ERAM is to be treated as a high-impact system. One of the most important is robust back-up capability, which is currently not available. Originally, FAA retained a basic back-up system from HOST, but that system was taken down several years ago, and OIG notes that FAA’s decision to do that did not take into account NIST’s back-up requirements.

Those with long memories will recall the September 2014 sabotage at Chicago Center, which was then off-line (“ATC-Zero”) for 17 days. Controllers fanned out to four adjacent centers, but the transition was far from seamless. FAA has not produced robust back-up plans for its 20 centers in the event of a future shutdown of one of them. This is in contrast to the larger air navigation service providers (ANSPs) overseas. Eurocontrol’s two high-altitude centers each have a separate back-up facility, one in Brussels and the other in Paris. The same goes for NATS, whose two modern centers have a contingency site that can take over 85% of the functions of either one. Airservices Australia’s two consolidated high-altitude centers can each fully take over for the other if one goes down. Nothing like that exists in FAA’s system. It should be required, especially now that ERAM has been designated as a high-impact system.

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As SpaceX, Amazon and OneWeb Compete, Does Government Need to Fund Rural Broadband Infrastructure?

It seems that every time you turn around there is another proposal in Congress to appropriate billions of dollars to expand rural broadband service. Members from rural districts can win points for modest bills like the Serving Rural America Act that would offer $500 million in subsidies over five years. There is bipartisan support for a Rural Broadband Acceleration Act, that seeks to speed up a current $20 billion Federal Communications Commission (FCC) program to subsidize rural broadband well into the future. And the $3 trillion the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, passed by House Democrats as a follow-up to the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act stimulus bill signed by President Trump, included $5.5 billion for rural broadband.

But what if the private sector was already investing billions of shareholders’ money in efforts to provide internet access to rural areas not just in the United States but worldwide? And what if those efforts were proceeding at the pace of business, rather than at the pace of government?

In fact, that kind of effort is already underway by at least three companies. On August 18, SpaceX used a Falcon 9 rocket to launch 58 more of its Starlink satellites. That was the 11th Starlink launch since 2019, bringing its constellation of global internet satellites to 658. The company aims to have 1,584 in operation by 2021-22, aiming toward a goal of the 12,000 that have already been approved for it by the Federal Communications Commission.

A would-be competitor is OneWeb, whose initial target is a 648-satellite constellation (of which 74 are currently in orbit). The company filed for bankruptcy protection in March, but a rescue has been organized by India’s Bharti Global and the UK government, with OneWeb’s creditors owning 10%, so OneWeb may well continue.

The most recent entrant I’m aware of is Amazon, reported by the Wall Street Journal on August 13 to be planning a $10 billion investment in a network called Project Kuiper. Like Starlink and OneWeb, Amazon’s venture aims for over 3,200 low-earth-orbit satellites to provide global internet access. The report quotes Amazon as saying “its satellites could help bridge the digital divide by bringing high-speed broadband to areas that lack competitive internet service.”

To be sure, all three companies will be spending many billions to develop these satellite networks, so one might be skeptical that their services will be affordable to less-affluent people living in rural areas, whether here or in developing countries worldwide. That fear might be more realistic if only a single company—a potential monopolist—were building such a service. But with at least three competing firms (and potentially several others), there will be real pressure to provide affordable service, with the trade-off being a low price but many millions of customers. That model has succeeded in bringing affordable smart-phone service to hundreds of millions of people in developing countries over the past decade.

At a time when the federal government’s spending is increasingly out of control, it is very hard to justify allocating billions more in taxpayers’ money to a problem that is well on the way to being solved by competitive enterprise.

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Future Revenue Sources for Air Traffic Control

Nearly all of the discussion over the near-collapse of commercial aviation has focused on airports and airlines. But air navigation service providers (ANSPs) are also under similar fiscal stress. Worldwide, most get their revenue from International Civil Aviation Organization-compliant en-route and terminal-area user fees from airlines and private planes. Others, like FAA, are funded mostly by aviation user taxes. Both types of revenue have shrunk dramatically as air travel has collapsed. Yet air traffic control has to remain in operation despite the revenue shrinkage, and a few ANSPs have gotten various sorts of government bailouts to tide them over.

These developments have stimulated discussion of likely new entrants into the airspace—at the top (high-altitude balloons, a new generation of supersonic transports, increased space launch activity) and at the bottom (UAS traffic management and urban air mobility—UAM).

In Europe, the European Union Aviation Safety Agency (EASA) has issued a draft proposal on the regulation of what the Europeans call U-space—the domain of unmanned aircraft systems (UAS) and unmanned aircraft system traffic management (UTM). The ANSPs in Europe seem to be divided into two camps on their role in this. One group envisions the very low altitudes as an extension of the airspace that they must be in charge of—and presumably to charge user fees for, precluding other players from doing so (unless the ANSP chooses to contract with U-space traffic managers). Other ANSPs see this very different domain as not theirs, but one which obviously must be interfaced with legacy air traffic.

In the United States, in which real air traffic user fees are non-existent, FAA and NASA are working on a model for some kind of traffic management in U-space, but are also thinking about extending FAA’s domain upward to Class E airspace, above 60,000 feet. In a detailed article in the Spring 2020 issue of The Journal of Air Traffic Control, NASA’s Parimal Kopardekar notes in passing that, “We need to question every assumption on which our current [Air Traffic Management] system was built based on decades of old technologies and trends.” But in the lengthy discussion which follows, there is zero mention of how all these new entrants will pay for the traffic management services that will be needed in the expanded airspace.

Surprisingly, non-Western ANSPs are thinking hard about these new domains as additional sources of user-fee revenue. Bill Carey reported two such examples in Aviation Daily recently (“New Aviation Segments Hold Promise for ANSPs,” Aviation Daily, July 29, 2020).

One of these ANSPs is Kenya Civil Aviation Authority (KCAA), which is looking at how to charge operators of low-altitude drones and high-altitude balloons. On the latter, Alphabet’s Loon division has announced the provision of new mobile internet service in cooperation with Telkom Kenya. Loon will operate 35 balloons equipped with LTE wireless base stations, initially covering an area of 19,000 sq. mi. “This is a revenue stream for us,” KCAA director-general Gilbert Kibe told Carey. “We charge them navigation fees like other airplanes.”

Another ANSP looking at new revenue streams is Saudi Air Navigation Services (SANS). In the last two years, SANS COO Abdulaziz Alzaid told Carey, non-aircraft revenue was only 1-2% of its total. But that has increased to 15%, and Alzaid aims to increase that to 50%. That would be difficult unless drones and other non-traditional airspace users were to be charged user fees.

FAA and NASA need to start looking beyond just technology and regulations. Managing non-traditional traffic—whether very low-altitude or very high-altitude—will cost money, and the users of this airspace should pay what it costs to keep them safely separated from other traffic and obstacles on the ground.

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Further Thoughts on Airlines’ Future

Air travel continues to recover more slowly than forecast several months ago, and most U.S. carriers have scaled back previously announced expansion plans. S&P Global reported earlier this month that there are only three investment-grade-rated airlines left: EasyJet, Ryanair, and Southwest. All three, plus ultra-low-cost carriers (ULCCs) such as Allegiant in the USA and Wizz Air in Europe stand to gain market share in the recovery—assuming government policies don’t prevent this from happening.

As I wrote in a recent Reason Foundation commentary, pleas from airline employee unions for another six months of airline subsidy conditioned on keeping all employees on board—the majority of them being paid for doing nothing—are foolish. What happens after that six month period is up, and air travel is still several years away from returning to “normal”? Another bailout, and another after that?

What needs to happen is for market forces to restructure an airline industry that was poorly managed, in most cases without the financial strength to carry on operations without large taxpayer bailouts. But preserving the pre-pandemic status quo that was not sustainable is a fool’s errand. Well-managed carriers should have the opportunity to add market share, while other legacies figure out smaller, more-realistic business models.

But governments, responding to interest groups and local politics, inevitably attempt to preserve the status quo. We see this in Europe, where the legacy carriers are lobbying fiercely for another waiver of the 80% use-it-or-lose-it rule on airport slots (which are used at far more airports in Europe than here). Even airport trade group ACI-Europe has compromised on this proposal. Instead of speaking out for increased competition, it supports extending the waiver with “clear conditions attached.” Slot-holders would supposedly agree to notify the airport at least four weeks in advance of not using it, so the airport could scramble to find a short-term replacement, just for the winter season. Since air travel is still likely to be quite depressed next March, this approach undercuts new-entrant planning and is unlikely to find many takers. So far, only ULCC Wizz Air has broken ranks with airline groups. It argues that not only would the new waiver curtail competition, but it would also lead to fewer passengers at the affected airports, hurting them and their employees and suppliers.

The Austrian government has not only bailed out loss-making Austrian Airlines, it is also planning to implement an “anti-dumping” policy aimed at ULCCs, “to prevent ultra-cheap tickets from being offered,” which is how new entrants typically seek to get new customers to try their no-frills service. This is blatantly anti-competitive. So are Austrian and French bans or extra taxes on short-haul flights where passenger rail service is available (which is nearly everywhere in Europe). This ought to be a clear violation of European Union competition policy, but is being defended as climate-friendly. Ryanair is the only European carrier I know of that is filing suit against airline bailouts, on the grounds that it discriminates and is anti-competition. Of course, it is.

Back in the United States, the Republican-controlled Senate’s latest COVID-19 relief bill includes another $10 billion bailout for airports. As with the airline bailouts that I hope will not be extended past their October expiration date, airports that accept any of these funds would have to keep at least 90% of all staff now employed through March 31, 2021. I repeat, it makes no sense to force hard-pressed U.S. taxpayers to pay thousands of airline or airport workers not to work.

Famed economist Joseph Schumpeter understood the power and benefits of competition more than most economists. He argued that both recessions and new technologies cause economic disruptions which are, of course, costly and painful for those who lose their jobs. But the most productive economies are those that allow this “creative destruction” to proceed, rather than using government regulations and bailouts in a vain effort to preserve the status quo. To be sure, unemployment insurance and job-training programs are intended to ease the pains of these transitions to new jobs in new industries.  But attempts to preserve the status quo prevent economies from changing in response to a changing world.

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Public-Private Partnership for eLoran Announced

An August 12 article in Intelligent Aerospace discusses an industry consortium set up to develop eLoran as a backup system for GPS. The prime mover appears to be Hellen Systems of Middleburgh, VA. Its founder is assembling an impressive team with the aim of pitching a public-private partnership to the federal government to proceed with implementing a long-discussed backup for interference-prone GPS, which is widely used across the entire economy, including of course air navigation and air traffic control.

According to the article, the team assembled by Hellen Systems include L3Harris Technologies, Microchip Technologies, Continental Electronics, and NeoTech Natel Epic OnCore. They cite all the reasons that eLoran has been proposed repeatedly as the best (or least-bad) approach to provide a reliable backup to GPS when its satellites are not within reach or during episodes of jamming or interference. eLoran is based on the ground, versus GPS in orbit. GPS operates in a high-frequency band, while eLoran uses low frequencies (90-100 kHz). GPS produces a very weak (low-power) signal; eLoran produces a high-power signal. And unlike GPS, eLoran can penetrate buildings, tunnels, etc.

In 2014 the UK implemented eLoran for maritime navigation, with a new system serving seven east coast ports. A presentation on the new system at the 2018 IAIN World Congress in Chiba, Japan summarized the studies that had led to the selection of eLoran, as follows:

“eLoran meets the accuracy, availability, integrity, and continuity performance requirements for aviation non-precision instrument approaches, maritime harbor entrance and approach maneuvers, land-mobile vehicle navigation, and location-based services, and is a precise source of time and frequency for applications such as telecommunications.”

And last year Russia announced a five-year Russia-CIS Navigation Plan that will rely on some version of Loran to complement GNSS (the generic term for GPS-type systems).

I routinely hear anti-eLoran complaints from aviation people. One of these is that eLoran is not good enough to substitute for GPS; after all, as noted above it can handle only non-precision instrument approaches. But as opposed to various theoretical constructs, isn’t eLoran better than the existing FAA plan to keep in place a large fraction of ground-based VORs and DMEs, as well as many radars that were supposed to be retired as part of NextGen? Like the FAA plan, eLoran is intended to keep flights safely on course when GPS is not available. It’s not a long-term substitute; it’s a backup system.

A second concern comes from people remembering the days before GPS, when many planes carried the large, old, heavy Loran receivers. The concern is that every airliner and every GA plane would need to find space for such a device, at some unknown cost. I find that objection ludicrous in today’s world of mass-produced micro-miniaturization. As one example, in 2017 a Dutch company, Reelektronika, released a combined receiver for eLoran, Cayka, and GNSS that is only 6 centimeters long. I’ve seen a photo of it held between a person’s thumb and forefinger.

Expert bodies have been calling for an economy-wide (not just aviation) backup system since the original 2001 report on GPS vulnerability from DOT’s Volpe Transportation Systems Center. A comprehensive study by an interagency task force in 2007 recommended eLoran as the best economy-wide backup alternative. The Department of Homeland Security in 2008 affirmed that finding. But nothing was done by the subsequent administration. Only in the last few years, as Congress began getting serious about the lack of any real program to implement this consensus, have things started to move forward.

Recent steps taken by Congress and the Trump administration are encouraging, and are probably what led to the creation of the Hellen/L3Harris et al. consortium. Let’s hope this finally leads to getting an economy-wide GPS backup capability underway.

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An Even More Ambitious Supersonic Project

Virgin Galactic has announced a project to develop a Mach 3 passenger transport aircraft. As summarized in Aviation Daily’s Aug. 4, 2020 issue, it would be a two-engine delta wing craft planned to operate above 60,000 feet. While some of Virgin’s businesses have fallen on hard times recently, this project has lined up two heavyweight partners: Boeing and Rolls-Royce.

Boeing last fall signed an agreement with Virgin Galactic for research on commercial space access and high-speed exo-atmospheric passenger flights—i.e., the long-imagined suborbital rocket service. Boeing’s HorizonX arm invested $20 million for shares in Virgin Galactic. They will work jointly on high-speed transport studies, which may include the proposed Mach 3 transport as well as exo-atmospheric flights. Boeing’s NeXt technology incubator has previously invested in the Aerion AS2 business jet project.

Rolls-Royce is officially the propulsion partner for Virgin’s Mach 3 project. It built the engines that powered the world’s first supersonic airliner, the Concorde (which was not commercially successful). Boeing’s HorizonX has also worked with Rolls-Royce and BAE on the engine technology being developed for supersonic flight by the UK company Reaction Engines, which is aiming for a Mach 5 capability. Rolls-Royce last month announced that it is also working on propulsion system technology for Boom Supersonic’s planned Mach 2.2 airliner.

Virgin is also working with NASA on developing the technology for a supersonic transport. It signed a Space Act Agreement with the agency in May. And it will also soon begin working with FAA’s Center for Emerging Concepts and Innovation. That work aims to deal with factors relating to certification requirements for a supersonic transport aircraft. The current FAA draft requirements concern only noise on landing and takeoff.

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News Notes

The Atlantic’s Article on Airport P3 Leases
The Atlantic just published an article urging financially-stressed local governments to consider cashing out the asset value of their airports under the federal Airport Investment Partnership Program. Author Joe Guinto points out the global trend under which more than 100 large and medium airports have been “privatized” over the past 20 years, with the only U.S. example being San Juan International, which produced, as he notes, a very positive transformation. He also notes the upcoming charter amendment on the ballot in St. Louis in November to authorize the city government to resume the process of long-term leasing Lambert Field.

Truce Reached Over Masks at Atlanta Airport   
Back in June, Atlanta Mayor Keisha Lance Bottoms was dismayed that because the airport is a public facility, Gov. Brian Kemp’s executive order banned mask requirements that had been imposed by local governments. The city of Atlanta owns Hartsfield-Jackson International (ATL). By July, the mayor had sued the governor and imposed a mask requirement at the airport. That led to negotiations and, as of August 15, Kemp had issued a new executive order allowing local governments to impose mask requirements. A June 24 article in the Atlanta Journal-Constitution pointed out that if the airport was a private business, it would have been legal for it to impose a mask requirement, just as airlines have been doing.

Switching Mobile’s Airport—About $400 Million
Currently, airlines serve the Mobile Regional Airport, located on the Alabama city’s west side, where there is no Interstate highway access. General aviation is located mostly at Downtown Mobile Airport, which is closer to downtown and has direct access to I-10 and I-65. So the Airport Authority commissioned a feasibility study that judged that shifting commercial service to the Downtown airport would be feasible and would likely have economic benefits. The move will require a new eight-gate terminal at the Downtown airport, putting the total estimated cost of the move at $403 million. The timetable is uncertain, with estimates ranging from two-to-five years.

Less Airline Service Means Less Weather Data
Most non-aviation people don’t realize how much today’s detailed weather forecasts depend on near-real-time data gathered automatically by planes in flight and used as inputs to complex weather simulation models. Much of these weather data are assembled by the World Meteorological Organization’s AMDAR (Aircraft Meteorological Data Relay) program, under which aircraft transmit temperature, pressure, wind, turbulence, and position data. This far outstrips the data provided by weather balloons. In Europe, as early as March 23, the number of reports from aircraft had decreased by 65%. Satellite weather data continues, of course, and some additional weather balloon launches provide a bit more data.

London City Airport Puts a Hold on Terminal Project
After re-opening June 21, following a several-month closure, the investor-owned airport announced this month that its current expansion project will be halted at year-end, after completion of eight new aircraft stands and a full-length taxiway. On hold will be the completion of the planned terminal expansion and east pier.

Paine Field Re-opens with Fewer Flights
The privately developed and operated passenger terminal near Seattle re-opened to airline travel on August 1st, with flights by Alaska Airlines to Las Vegas and Phoenix and by United to Denver. Propeller Airports had shut down the terminal for two months in response to both airlines eliminating nearly all service in the spring. The 10-week closure enabled the company to resurface the ramp area with concrete, replacing the former asphalt, and do that job in half the time it would have taken with airline operations underway. Mask wearing is mandatory in the terminal.

Whoops! Delta Finds Oil Refining Is a Tough Business
It seemed so simple. Jet fuel is a major airline expense, so why not eliminate the middle-man and produce it yourself? That was then-Delta CEO Richard Anderson’s logic in buying an aging refinery near Philadelphia. In a recent New York Times article, Clifford Krauss and Niraj Chokshi detail the airline’s tale of woe in running a business they were not really knowledgeable about. The refinery lost $114 million in the second quarter “and its future appears bleak.”

Russia Operating World’s Largest WAM System
Wide-area multilateration (WAM) is an alternative to radar that a growing number of countries are implementing, rather than buying replacements for aging radars. Last year, Air Traffic Management reported that the world’s largest WAM system was deployed in northwestern Russia in April 2019. Developed by CRTS Digital Radio Systems, the North-West WAM system includes 31 widely-spaced sensors, covering a million square kilometers of territory. Its update rate is once per second, comparable to ADS-B and much faster than radar.

Sydney Airport Raises Additional Equity
What does an investor-owned airport corporation do when air travel plummets? In the case of Sydney Airport, Australia’s largest, the answer is to offer its shareholders the opportunity to increase their investment. The airport company had a $39 million loss during this year’s first half. To beef up its balance sheet and reserves, Sydney Airport announced a $1.4 billion offer to existing shareholders to purchase additional equity. If successful, the equity increase will be used to reduce the company’s debt, thus reducing annual debt service payments during several years when airline and passenger revenues are decreased.

Private Jets Doing Well During the Pandemic
Despite the large shrinkage in airline travel since March, one segment is doing far better: private for-hire flying. The Los Angeles TimesHugo Martin reported last month that companies like NetJets, Surf Air, and XO Jets are booking about 80% of their pre-pandemic volume. People who can afford the rates can avoid crowded airport terminals, travel in small groups, and receive basically normal in-flight services. Some of these companies are doing more than 100% of their pre-pandemic volume, with growing numbers of first-time private-jet travelers.

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Quotable Quotes

“There is an easy way to change the industry. Treat airlines like businesses. Let them go bankrupt like businesses. The barriers to entry have never been lower for those that want to shake things up. There are trained staff, slots, gates, aircraft, and interesting markets available. New players could start again on things like seniority, slot hoarding, and leasing and other contracts. The entire industry needs significant root-and-branch reform. If not now, when? Yes, there will be a nasty period of readjustment; yes, airlines, airports, and even ANSPs will go bankrupt, but at least it will be honest, unlike the gravity-defying act of self-deception we are engaged in now. Get rid of the zombies we have today, living hand-out to mouth.”
—Andrew Charlton, “The New Normal: Creeping Bermudaism,” Aviation Intelligence Reporter, August 2020

“I call on the European Commission to end the 80-20 slot waiver regulations for all airlines in Europe as of Oct. 25 and support the recovery of the aviation sector and the associated industries by allowing genuine market conditions to prevail. The current plan to prolong the waiver until March 2021 is against free competition and protects incumbent airlines with weak business models, while airlines like Wizz Air are ready to take up new market opportunities.”
—Jozsef Varadi (CEO, Wizz Air), in Alan Dron, “Wizz Air Breaks Ranks on Airline Industry’s Slot-Waiver Stance,” Aviation Daily, July 27, 2020

“GPS has been a tremendous gift to the world. But its vulnerabilities needlessly put our economy and safety at risk. We must not wait until disaster strikes to fix this issue. The eLoran technology can be deployed quickly and at a fraction of the cost of other systems. It will provide resilience for key infrastructure. It will unlock innovation and create jobs. GPS is a marvelous but ethereal scaffolding upon which our entire economy hangs. The resilient, affordable ground-based technology of eLoran is the safety net we need now.”
—Kevin Coggins (Booz Allen Hamilton), “Deploying a Backup to GPS Will Protect the U.S. and Spur Innovation,” C4ISR.net, Aug. 19, 2020

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